If you have seen a foreclosure property appear on the market lately, you may be tempted to swoop in and purchase it at a fraction of the price that you would had it been a normal sale. Although foreclosure sales are not as common in Canada as they are in the US, they sill happen typically through either a judicial sale or a power of sale.
Each of these methods comes with its own circumstances, so if you are going to buy a foreclosed home, it is important to work with an experienced real estate lawyer who can help you through the process. Whichever method of sale however, buying a foreclosed property has some pros and cons that you need to be aware of.
The risks of buying a foreclosed home
When you purchase a foreclosed property, the home is usually going to be sold “as is”. This means that they home will likely lack cleanliness and may have even been neglected or vandalized. Chances are, you are going to have to put some time and money into cleaning and repairs before the home is in livable condition. Furthermore, if there are serious concerns such as foundational or electrical issues, you will not have any recourse against the seller. There will be no representations or warranties pertaining to the property.
Since you will be buying the home from a lender rather than the previous owner, there will likely be more red tape and legalities to deal with, making the entire process longer.
Additionally, you will likely be restricted as to when you can view the property. Since there is likely no hydro, viewing will probably be restricted to daylight hours.
Getting financing on a foreclosed home may also be a challenge since the lender will probably require an appraisal – which is hard to do when the owner has been evicted.
There will be competition
Even for a distressed property, it is likely that you will face competition from other investors looking to get a cheap price on a foreclosed home. And not all foreclosure sales will be conducted according to the normal real estate process – some could be processed through an auction.
When purchasing through an auction, you will need to be aware of any additional rules should you win the bid such as same-day minimum deposits and short deadlines to pay the full purchase price. It is also important to keep in mind that many lenders may not offer mortgages on foreclosed property, and this will leave you needing to find another way to finance the property.
Rewards of buying a foreclosed home
Although there are certainly some risks, there are also some rewards in buying a foreclosed home. For starters, it offers buyers a unique opportunity to purchase a property below market value.
Another advantage is that the in most cases the seller is going to remove any liens, mortgage loans, or back taxes from the previous owner. This happens because the lender who is selling the property will want to sell it quickly.
Contact Minhas Lawyers today
Buying a foreclosed home does come with advantages and you may be able to get a good deal however it is important to be aware of the risks as well. If you are considering purchasing a foreclosure property, you need to work with a real estate lawyer who can help you navigate the risks.
Contact Minhas Lawyers today to schedule a consultation with our real estate lawyer!
Minhas Lawyers LLP is a multi-practice law firm based in Mississauga. We advise and represent clients across various segments and practice areas.
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