Tag Archives: Foreclosure

The Risk & Rewards Of Buying A Foreclosure

Date: November 23rd, 2020
By: Ron Thibeault

Understanding The Ins & Outs Of Foreclosure/Judicial Sales

Often when we get calls from clients wanting information on buying a foreclosure, the background information they have is out of the US. In Canada, each province has its own set of rules and procedures and understanding how the process works in Alberta will help you decide whether the risk is worth the reward.

What Is The Difference Between A Foreclosure And A Judicial Sale?

There aren’t big differences in the end result of these two processes, but a Judicial Sale is a bit of a strange duck to be perfectly honest. In the case of a foreclosure, you are buying the property from the lender who has obtained title. In a Judicial Sale, technically, the original owner still has title but now the Court has imposed a sale process to secure a final sale that can compensate the lender whose mortgage is in arrears. The key point in a Judicial Sale is that right up to the last hour, the Owner has the right to do what is called “redeem” the mortgage – to bring in all the arrears and costs, etc. and if they do that the whole foreclosure process is halted. Any offers are put aside, and we are back at square #1.

The Risks Of Foreclosure Properties

When clients consider purchasing a foreclosure property they receive a draft offer from the Listing Realtor that looks very different. There are large parts of the standard contract crossed out because either the Court or the lender will not give the standard warranties that a Seller has to give – that is because they have never truly owned or resided at the Property – they are simply there to facilitate the foreclosure process. That means there are risks for you as a Buyer which include:

1. You must conduct your own due diligence and be thorough about it;
2. The Property might have serious compliance issues
3. There might be serious hidden defects in the Property;

4. There may have been criminal activities in the Property that render it uninhabitable;
5. The appliances may not operate or even be in the Property;
6. The Owner may have sabotaged the Property on purpose;

7. There may not be permits in place for development;
8. The Property may be further damaged between the time of your Offer and the closing; and
9. The endless list of other potential issues.

Can You Avoid the Risks?

As a Buyer you are very limited in your ability to avoid all of the risks of a foreclosure, but you can certainly minimize them. Amongst the things you can do include:

1. Reviewing the title with your lawyer;
2. Complete as many inspections as you can or are permitted;
3. Confirm whether the owner is still in possession or is the property tenanted;
4. Contact the City to determine if there have been any permits applied for and whether they are completed;

5. On closing, ask your lawyer to obtain title insurance for you;
6. Make sure your Realtor is well aware of the foreclosure process;
7. Employ legal help sooner than later; and
8. Don’t assume you have any protections whatsoever. This is a dangerous pitfall that can cause your nothing but harm

Understanding the Ins and Outs of buying a foreclosure/Judicial Sales is where we can step in and help you out. Don’t hesitate to contact us for assistance and advice. Understanding your risks right at the start can make this an option for purchasing that you wouldn’t consider otherwise. Call us at 403 245 3500 or email us at [email protected]

Buying Foreclosed Properties Comes With Risks

Date: November 5th, 2019
By: Ron Thibeault

So, you want to get a deal? Looking at a foreclosed home? Well, the risks in doing that might be more than you expected. Often what looks to be a fantastic deal really might not be exactly that in the end.

Normally, the Seller gives certain warranties to the Buyer that the property will be, amongst other things, in the same condition as when it was originally viewed, that there are no compliance issues, that there are no defects the Seller is aware of. This is not the case in a foreclosed property.

Risk? What Risk?

The major issue in dealing with a foreclosed property is that the lender who has foreclosed will be selling the property with no warranties whatsoever. A typical term of an Offer relating to a foreclosed property specifically states that the property is being sold on an “as is” basis.

What does this really mean? In layman’s terms it means that you assume all of the risks with foreclosed properties and may ultimately be left holding a property that has serious deficiencies.

In a standard transaction, the Seller warrants to the buyer that there are no compliance issues and is obligated to provide evidence of that. In a foreclosure situation, you will likely not know of any compliance issue until you go to sell the property in the future and, most importantly, will be left with the problem because the lender sold the property “as is.”

What Is The Worst That Can Happen?

How serious can the problem be? If you purchase a property with a serious compliance issue, say a portion of the garage was encroaching into the neighbouring property, you might not be able to resell that property until that issue is resolved, which could include moving the garage; you have absolutely no recourse as against the owner/lender who sold it to you.

Ultimately, buying a foreclosed property is not for the faint of heart. If you decide to make an offer on one you should ensure that your agent is fully aware of how to protect you and discuss the issue with us prior to making your offer. Sometimes deals really are too good to be true but we can help you get through the process.