Looking to buy a foreclosure? As a potential buyer,
it is important to know the process of purchasing a distressed property.
A distressed, or foreclosure sale, results when the
borrower defaults on his or her mortgage payments. The sale of the property is
to satisfy the payment of the loan.
To start, there are two options that the court can
take in foreclosure proceedings: a judicial sale or an order absolute of foreclosure.
A judicial sale is when the lender has the property
listed for sale under the supervision of the court. If there are no offers from
a judicial sale, the lender can seek an order absolute of foreclosure, thus becoming
the new owner. It should be noted that this process falls under provincial law
and accordingly there may be minor differences between provinces in terms of how
the sale of a distressed property will unfold; in Ontario the lender can list
and sell without court approval, while in Quebec the lender must first take title.
In Western Canada the steps to purchasing a foreclosure
are:
The lender/mortgagee applies to the court to sell the
property where the borrower has defaulted on payments.
A court order is given to the mortgagee to sell the property.
The mortgagee can list the property with a local realtor.
The court must approve the purchase price and the terms of the sale
The purchaser makes an offer that is first accepted by the mortgagee.
An application is made to the court to present a no-subject offer (all financing,
inspection, review and other conditions have been approved).
The court then either accepts or rejects the offer (same as if dealing with a
vendor).
The court ratifies the offer that day and completion and possession dates are
confirmed.
The difference in purchasing a foreclosure property to a regular property is with
a foreclosure; a no-subject offer must be presented to the court for approval.
In a regular sale, which usually has subjects, an offer is presented to the owner/vendor
of the property. In most cases an offer presented to a regular vendor is countered
and the negotiation between the buyer and the seller can often be a tedious and
cumbersome process.
To ensure your mortgage financing is in place before
presenting your offer to the court, here is a quick checklist that your mortgage
consultant or financial institution will need from you:
Personal information such as; name, age, marital
status, dependants, social insurance number.
Balance of chequing and savings accounts.
Credit card account numbers with current balance.
Stocks, bonds, mutual funds or RRSP values.
List of any outstanding debts and the remaining balance.
List of assets and their estimated value.
Confirmation of employment on employer’s letterhead stating position, length
of employment, and gross income.
Two years T-4 slips or Tax Returns and one current pay stub as proof of income.
Three-year income statements and balance sheets, three-year Revenue Canada Assessments
and three-year tax filings (T1 general) if self-employed.
Links:
www.foreclosures.ca
www.vancouverrealestateinfo.ca/gold_distress.asp
