Posted by: Daryl & Wendy Ashby | July 1, 2010

Buying Foreclosures

Sounds sexy, but it really isn’t.

There are likely less than 40 active residential foreclosures listed for sale right now in B.C. and while foreclosures have a tendency to bring the “shark” out in all of us, in most parts of Canada you have to be a very patient shark indeed.

Because our laws differ so much from those south of the border, coupled with the leniency displayed within our courts, the foreclosure dance in this country is carefully choreographed to the benefit of the property owner, as much as possible.

The real successful purchases of foreclosures come during the order nisi period (ie. the grace period the owner is granted before he or she is foreclosed.) During this period you have to deal with the owner rather than the court, but because of Canada’s new privacy laws, it is difficult to find such properties and their respective owners.

Despite the press write-ups and the TV ads, very, very, few investors are successful here in Canada, compared to the frenzy in the U.S. where the repossession laws are much tougher on sellers. The same can be said for “tax sales”.

In real life we do not get what we think we deserve but rather what we negotiate — so remember, all deals are negotiated — even those under foreclosure. Most deals under foreclosure, even after much work, end up just your average deal. Regardless, there is a lot of work involved.

A fact to keep in mind is that foreclosures work best in a down market, not a hot market. Even so, invariably some people with get into trouble in any market.

The first step is to visit your provincial courthouse where a list is published daily of all foreclosed properties. You can buy these addresses just by going to the courthouse and asking for it.

Some general rules to keep in mind:

* Any offer can contain a “subject to financing”, that is if the bank or lawyer representing the action will accept it. But before it goes to court for approval, all subjects have to be removed.

* Your opening offer is just a key to the front door of the courthouse. Once presented, all other participants will know your bid.

* Expect competing offers on the court date, including possibly from the old owner. Offers can be presented right up until the judge’s gavel hits the block. Therefore have a second, better offer ready to present.

* Always take your realtor and/or lawyer with you. On larger deals their interaction on your behalf will prove beneficial.

* Foreclosures are generally sold as is/where is. Take a building inspector and an appraiser with you when you gain access to the property for viewing.

* Have a predetermined price in mind before you go into court. Don’t get caught up in a bidding frenzy.

* Before you make your offer, understand the value of properties within the community you are looking. This is where your Realtor will prove of value.

Remember, when you get to court, this is where the real bidding will take place and all bids are open on the table for everyone to see. By tradition, the courts will lean towards the old owner, even if their offering is somewhat less than the highest offer of the day.

As we have said, good deals are hard to find with foreclosures in Canada and if they are available, it will take a lot of work.

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