In the real estate world, deals come in many different forms. One such form is a foreclosure property. A foreclosure results when a borrower defaults on his or her mortgage payments. The sale of the property is to satisfy the payment of the loan. In Alberta, foreclosures are processed under judicial sale but the court ordered sale is carried out under the Court of Queen’s Bench.

The foreclosure process is quite complicated and your ability to secure a good price will, in many cases, depend on what stage the process is at. It will also depend on your ability to choose a knowledgeable realtor, whose expertise can guide you smoothly through the process.

UPSIDE OF FORECLOSURES

No fear of upsetting the vendor. In many cases if you write a low-ball offer on a listed property, the vendor may become upset and counter at full list price, essentially telling you to go away. In a foreclosure, depending on what stage it is at, the lenders or the courts do not have an emotional attachment to the property. They will either accept, reject or, in rare circumstances, counter-offer.

Good price. Sometimes foreclosures are priced below market value.

Quick possession. In many case foreclosures are vacant allowing for a quick possession. So, if you need to start renovations right away, it is possible to do so.

DOWNSIDE OF FORECLOSURES

No condition offer. Usually, if you wish to purchase a foreclosure, a no condition offer must be presented to the court for approval. This means you cannot make the offer subject to a home inspection or financing. You have to be absolutely sure you can obtain financing to buy the property before tendering your offer.

Property sold as is. When you write an offer on a foreclosure you must sign a schedule A form. This form specifies that you are waiving your right to litigation if you take possession of the property and it is not in the same shape it was when you originally viewed it. It also specifies that lender or court makes no warranties or representations that anything in the property functions as it should. As well, none of the chattels ( fridge, stove, etc) are sold, conveyed or transferred with the property. The property is sold “as is, where is” and there is no guarantee that you will get a survey or Real Property Report.

Multiple Offers. In many cases, when a foreclosure is listed, there is a time period that offers must be left open before they can be dealt with. Sometimes this time period is as long as two months. Usually, during this time period, a number of offers come in on the property. It then becomes a multiple offer situation where the best offer is accepted. The best offer may well be over the asking price for the property.

Paying too much. When a lender forecloses on a property there are costs involved such as legal and realtor fees. Sometimes, if a lender hopes to recover these costs, the property is listed at an asking price higher than what it’s worth.

FIXER UPPERS, MOTIVATED VENDORS, DISTRESS SALES, ESTATE SALES

Sometimes you may find the best deal with other types of properties. A vendor may decide to price a property well because it needs major repairs and he or she is not inclined or cannot afford to do.

If a vendor is getting transferred to another country or province, for employment purposes, there may be some motivation to take a reduced price on the property to affect a quick sale.

If there is marital discord, a home may be priced below market value as the couple may no longer wish to remain in a home that has stood witness to bad memories.

In an estate sale, sometimes there are family beneficiaries of the will who are more concerned with getting their hands on their share of the cash than they are with fair market value.

So you see, real estate deals come in many forms. If you are working with an experienced realtor who can help you determine vendor motivation, track deals as they become available, and negotiate the best price and terms, you have a much better chance of succeeding with your investment goals.

If you have any questions or would like more information, feel free to call Brian Braaksma, Sutton Canwest Vista, 278-9208. Usually, I can save you a lot of time by talking to you for a few minutes to determine your real estate goals.