Buying Foreclosures in Calgary: What you Need to Know To Get Started

The current financial downturn in Alberta, is presenting new opportunities.

There are people who for reasons beyond their control can no longer afford to make their mortgage payment.

This unfortunate event creates opportunity for Real Estate Investors. Whether the market is up or down if you can purchase a property for below market value you can almost always be assured a profit.

A few things you need to know about foreclosures.

There are many different factors at play when purchasing a foreclosed home. Such as, the type of property, type of ownership, type of mortgage, and the equity in the property which will have an impact on the ultimate process, timing, and method of sale employed by the Lawyers.

The important benefit of using a Realtor in the purchase of a foreclosure property is the Realtors ability to recognize the different circumstances, and address each as required.

There are 2 basic types of foreclosures;

1. Property ownership has been transferred into the name of the lender. The lender can list and sell the property the same as any other home owner. With the exception that most lenders will insist that the *standard warranties and protections given the buyer in the sale contract be deleted when an agreement of sale is entered into (Typical Schedule “A”)

*Examples of standard warranties and protections that are often removed are, (a) The seller to a provide a current Real Property Report with compliance, (b) All chattels (the fridge, stove, dishwasher etc.) must be in good working order. (c) The structure was built to safety & municipal code (d) Seller must disclose any patent latent defects, these are issues with the property that need to be repaired or could impact the value of the property negatively and are probably not visible, like having been a grow-op in the past. (e) Disclosure of development of the property without permits. These are just a few.

The Schedule “A” Instructs the buyer to sign confirming that they accept the property is as-is, the seller makes no promises or guarantees regarding the property and it’s condition.

2. Judicial Listing. Under judicial listings the Court is the seller of the property. Offers are submitted to the lender’s solicitor, who may counter, reject or accept an offer (subject to approval by the courts). Until Final court approval the home owner has the right to redeem the mortgage (bring it up to date) terminating the judicial listing. *Normal protections given buyers in a sale contract are removed from judicial agreement of sale as well.

Real Property Reports and Survey Certificates

These types of sales normally Do Not include a Real Property Report, portions of the agreement of sale stating seller will provide a RPR (real property report) with compliance is removed.

This means the seller denies any knowledge or responsibility for the property complying with any land use or zoning by-laws, regulations or municipal development agreements. This risk is therefore accepted by the buyer.

The locations of any buildings and other improvements on the property are the sole responsibility of the purchaser.

Whether or not any buildings or improvements encroach onto any neighboring lands or whether buildings or improvements on neighboring lands encroach on to the subject property.

The size and dimensions of any buildings or the property, or whether the land or buildings are contaminated become the sole responsibility of the buyer.

It is fairly common in older neighborhoods to find garages and fences placed too close to an alley or neighboring property, this requires an agreement between parties involved to be registered on tittle.

Attached / Unattached Goods (Chattels)

Any “unattached or attached” goods on the property at time of possession are “as-is” The seller does not warrant ownership of such goods, and will not be held responsible for removal of such goods. Chattels viewed in the home during the listing period may or may not be in the home at possession.

Buyer Beware!

The sellers offer no representation or guarantee whether or not the property is contaminated, or contain any hazardous substance. Whether used for illegal drug manufacturing, grow operation, or stigmatized in some other way.

Buyer is responsible for any costs to re-connect utilities.

The seller normally states it will NOT supply any certificate or assurance that the purchase and sale transaction is NOT subject to the GOODS and SERVICES TAX. So if there is GST due it becomes the responsibility of the purchaser.

*Realtors experienced in these types of transactions can generally provide answers to most of these questions by thoroughly researching the property.

Buyer Conditions

I have encountered situations where the home owner is uncooperative in not allowing viewing or inspection of the property, in this instance, normally the lender will allow a condition of “subject to viewing property within 24 hours of acceptance of offer” This offers some opportunity to see what you’re getting. It is normal in many foreclosure transactions for the court and / or the lender to be unwilling to consider offers to purchase that contain conditions such as Financing, Property Inspection, and Condominium Document review. The buyer needs to have financing securely in place.

Foreclosures can be GREAT Bargains, however the purchase of one of these properties requires navigating through a minefield of potential problems.

Don't take the chance of "Going it Alone"

Let me help you through the minefield.

Lenders normally establish a selling price more or less based on current local market values, often without actually seeing the property so they don’t have firsthand knowledge of its condition.

The Lawyers representing, sellers and the Courts like to try to have multiple offers in hand before making a decision, this can sometimes cause lengthy delays before finding out if you get the property. In the case of judicial listings a court date is set once the Lawyer has received at least one offer, it can take up to 3 weeks to get a court date.

Typically the highest bid gets the property, possession date and conditions also plays a roll. In the case of judicial foreclosures the Court normally sets the possession date.

I recommend, establish your bid on the results of your own due diligence, don’t worry about what the asking price is. This is information I can provide by taking a close look at the recent activity in the immediate area. The focus here needs to be on what has sold, not properties listed for sale.

It’s important before making an offer on a foreclosure property that you carefully establish the value of the property at the time of the offer by comparing it to similar SOLD properties and adjusting for condition. Care should also be taken to establish what the value of the property will be after any renovations and or remodeling is complete. Keeping in mind it is normal to find unexpected sometimes costly problems in a renovation project. Seek the advice of professionals when creating your budget

If the goal is to purchase the property and resell for a profit, great care needs to be taken to anticipate the market conditions when the project is complete, timing is very important

If the highlight of the property is to be yard, gardens and or outdoor improvements it’s important the house be ready for market in the spring or early summer, having the project complete 6 months late could be costly.

When budgeting for the renovation project remember to factor in carrying costs for the length of time the project will take.

Consult with an accountant to determine at what point GST becomes due on the sale of a renovated home.

Be cautious if enlisting the help of people claiming to be “Get Rich Quick” experts who are not from Canada and may not be familiar with Canadian Law. Check to see the origin of the websites you’re researching. U.S. Real estate practices and Canadian practices are much different. Some websites appear to be Canadian by using .ca but do originate from other countries. Errors made following poor advice could become very costly.

Call or email me anytime, use my experience and connections to make this an easy, profitable Investment.

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Lionel The Sale

Whether buying or selling. I will provide you with a complete explanation of the home buying process. Provide detailed information of the current and emerging real estate market. Assist you in selecting the best home for you, for your money. And Handle all the paperwork correctly to clearly express your intentions and represent your interests.

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