Student's killer on parole
Charges after investigation
Hostage was on captor 
Regulating power prices
Gen X is raking it in
LeBlanc laying groundwork
US vetoes UN resolution
$100M Nassar settlement
12 Trump jurors picked
Rates slow green economy
Vicinity hires president,
Record housing starts
Warriors ready for Round 2
Kalamalka Bowl cancelled
Rockets live to fight on
Rihanna's parenting ‘hack’
Tarantino scraps film
Munn talks cancer battle
The Foreclosure Process
Buying a foreclosure or other distress sale property can be a great way to build some immediate equity. If you buy right and have the elbow grease to fix it up (most foreclosures need some TLC), these distress sale properties can be a great way to make some quick cash.
However, buying foreclosures in British Columbia is not for the faint of heart. They can be risky and uncertain. There are a number of things you must know about the foreclosure process before you embark on a mission to buy one.
The first thing to know is how the Foreclosure process works.
Foreclosure proceedings begin when the borrower defaults on the mortgage payments. Any of the mortgage holders, if there is more than one mortgage registered against a particular property, can apply to sell the home through the courts. This process is called “conduct of sale”. This means the Foreclosure sale will be carried out under the supervision of the court and is referred to as a court ordered sale.
The lender will give a redemption period, usually six months, for the borrower to redeem the mortgage (i.e. pay up, including all owing interest plus legal fees, etc.). If the mortgage is not redeemed and the redemption period has passed, the lender can go to the courts and apply for conduct of sale. If the lender gets the approval of the court, the lender can sell the home and in Canada (unlike the US), the lender is entitled to recover the difference between the sale proceeds and the mortgage debt from the borrower. As usually these properties sell for less than what is owing to the lender, this can be a very large number.
Once the lender has been granted conduct of sale by the court, the lender can market and sell the home subject to approval of the court.
Many think that the bank will just “dump” the property, and sell it for whatever they can get, in order to get their money out. However, if you refer back to the previous paragraph – the borrower is on the hook for any difference between the sale proceeds and the mortgage debt. So for example – the mortgage owing on a property is $300,000. The Borrower stops paying. By the time the 6 month redemption period is up, the amount owing has increased to approximately $306,000 (assuming interest payments of $1,000 per month). Plus legal fees of let’s say $10,000. Now the new balance owing is $316,000. If this property sells for $300,000, the original Borrower will still be on the hook for $16,000 plus interest until the actual closing date. This is where the court gets involved to protect the Borrower and will strive to heed the advice of appraisers and Realtors to ensure the property is sold within a reasonable margin of fair market value.
As you can see, the process is complicated and we recommend enlisting the services of a Realtor experience in dealing with the foreclosure process when considering such a purchase.
Stay tuned for our next article, Part 2: 6 Steps to Buying a Foreclosure.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.
