With record-high interest rates as central banks try to stamp out inflation, housing markets are facing a shift into a tougher higher-for-longer rate environment. This is putting pressure on to owners who face higher debt financing costs, and often some of the first properties to come under stress are vacation homes and investment properties. In 2023, RBC anticipated mortgage delinquencies rising nearly 30% in the coming year.
Of course, it’s important to know where to look when it comes to buying foreclosure property. It’s also important to understand the different potential risks and rewards when entering into this type of situation as a buyer.
In this article, lets explore:
As always, feel free to reach out to me directly if you have questions about foreclosure properties or any listings you’re seeing. Note: this article is for informational purposes and should not be taken to constitute advice for any specific situation or infer a client relationship.
In Alberta, a foreclosure or judicial sale is when an owner (debtor) fails to make their payments in accordance with their mortgage agreement. The creditor (typically, a bank) will attempt to recover the amounts owed by taking ownership of the property, and selling it.
A lender will try and work with the debtor to pay the outstanding debt and get the mortgage back on track. Typically, during the course of a judicial sale or foreclosure, the owner (debtor) will retain the right to pay off the mortgage or find someone who will, at any time, even while the bank attempts to sell it.
When you purchase foreclosure property, you are buying it:
This applies to not just the condition of the property (ie. work to be done), but also to the condition and presence of any chattels (including appliances that may be included in a typical purchase). The Seller is also not making any representations as to the size, measurements, compliance with the town, zoning, improvements, encroachments, or if the property is contaminated with hazardous waste.
As Is, Where Is – On the Date of Closing: As a real estate agent, we’ve all heard the horror stories about a disgruntled person taking a sledgehammer (or a chainsaw) to walls, interiors, exteriors, etc. Yikes! I think many of us could understand the frustration and even anger that can come with a foreclosure. Its not a pretty thing, and unfortunately, this is a bad situation that nobody really wanted (but is a reality).
No, most times people do not vent their frustration with a sledgehammer. And often locks, etc. have been changes by the lender. But, when you sign off on the purchase of a foreclosure, you are taking on the risk of things changing in the property prior to the closing. And when emotions are involved, anything can happen.
With any investment, typically a higher risk is associated with a higher chance for reward. Foreclosure properties are no different.
When a property is listed by a bank or insurance company, they tend to be focused on one thing: their bottom line. With typical Sellers, they have an emotional attachment to a property, and likely complex goals with regards to pricing the property and their next move.
The Bank is looking for a quick enough sale to recoup their loss, and move on. Of course they want fair market value, but they can be a lot less picky about it compared to a homeowner. Its all about the bottom line.
Generally, when a foreclosure or judicial sale listing receives an offer, it must be:
Because of the nature of the offer process, its important that you feel 100% certain about how you will finance the property (if you are) and the condition of the property. When an unconditional offer is accepted, there is no going back.
Canmore is a small community, so we only have a few of these types of listings come up every so often. With interest rates in flux however, it’s possible we’ll start to see more coming up – and surrounding communities could also offer potential foreclosure options.
With outstanding local expertise, I can help you identify any foreclosure or judicial listings in our area, assess your options, and stay informed for any new Canmore foreclosure properties coming up.
The most important thing is that you feel qualified and ready to take on the risk that comes with this type of property. Again: this article is for informational purposes and should not be taken to constitute advice for any specific situation or infer a client relationship. Please connect with me if you’re curious about a specific listing you’re seeing.
Thanks for reading, and I’m always here to answer your questions about Canmore, Banff, Cochrane, Calgary and the surrounding areas. No question is too small.