Buying a foreclosed property: all you need to know!
Foreclosed homes, also called finance reversals, are properties resold on the market property to recover monies owed by the former owners. The seller is, that time, a financial institution, which became the owner following a court decision taking place in the framework of a procedure of taking in payment or it can also be a person designated by a Court to proceed to the selling at the former owners’ place (sale by judicial authority).
In the past, there were amazing deals since banks only aimed at recovering the amounts due. This is less the case now. In a seller’s market, few properties are actually put on sale or “listed” well below the market price unless they require major work. And that’s the rub. Because these houses are sold without warranty. Hence, the importance of having the home inspected by a licensed inspector.
Bargain but beware possibly other costs
First the inspection, since financial institutions will offer no legal guarantee. There will be no recourse or indemnities if a hidden defect appears after the purchase.
The vendors do not provide the documents in their possession. Thus, if the certificate of location is not updated, the seller does not provide a new certificate of location and if there is no location certificate in his file, he will not commit to establish a new one and hand it to you. If your lender requires a new certificate of location, you will need to appoint and pay a land surveyor to that extent. Expect an average price of 600 dollars.
The seller will not provide water test and no septic system compliance if the house is not served by the municipal system.
Steps in buying a foreclosed property
- Before the property is being placed on the market, the assessment is performed by two certified appraisers and a real estate broker. It is important to note that the price of the property is never under its market value unless the house needs major work.
- Once the price of the property established, the house is placed on the market and the financial institutions collect all purchases promises. Often a deposit of $ 1000 is required at the time of the offer, repayable course, if you are not accepted.
- Thereafter, bids are evaluated through a lawyer or a representative of the financial institution. Usually, it takes three to five days, which means that your bid must be valid for at least 72 hours.
- When there are multiple offers, it is common that the financial institution has a counterproposal. The property is granted to the buyer offering the most money, in the majority of cases.
- Subsequently, the buyer has a delay of about 30 days to have the transaction notarized before a notary almost always designated by the vendor. If the buyer does not meet the deadlines, the financial institution can ask him to pay a penalty fee.
Finding a foreclosed house alone or with help
The buyer can only search alone and go through ads, newspapers and websites to be updated when a new interesting offer arrives.
Another complementary way is to subscribe to a computerized service that automatically finds and downloads a list of these types of properties. Every day you will receive an updated list of foreclosed properties in the regions and in the price range you want. This information is usually free and not binding. In Quebec, several real estate brokers offer this service or simply specialize in the marketing of foreclosed properties.
To sum up, buying a foreclosed property can sometimes be a bargain and is sometimes the only way to find a home at an affordable price in some municipalities, but know how calculate other costs that you would not normally pay to ensure you make a real bargain.
Reference Réseau Habitation, 6 November 2014