Getting in on a foreclosure can be a great deal for you, but you’ll want to be aware of few things before trying to buy one. First understand that a foreclosure is a home that goes up for sale from the lender, because the owners have defaulted on payments. Foreclosures in Canada are very low, sitting at only 0.3%.
In a foreclosure, the lender is interested in mainly getting their money back in a quick amount of time, so a realtor is brought into appraise the property, and then a price is set for a quick sale, resulting in low price points.
How it works when you purchase a foreclosure
When you find a foreclosure property in the greater Toronto area you’d like to buy, you can submit an offer. The court then accepts the offer and creates a court date. At this court date, other interested buyers can make offers and the court will settle on what they think is the best deal for them.
You’ll want to do a no condition offer
Typically purchasing a house you can list several conditions such as financing, inspection or even the sale of the buyer’s current house. In a foreclosure you’ll want to minimize conditions as much as possible and even try to do a no condition sale. You’ll want to show up as the best deal for the court.
Have at least 20% down payment
If you need financing try to make sure you have at least 20% down payment to avoid the CMHC insurance. In a foreclosure the lenders won’t take your offer to the insurers, which you might end up buying a house you can’t get insurance on.
The lower price sale brings down the value temporarily
This means foreclosure buys may not be the best idea for flipping properties. It can take up to a year before the value goes back up. Talk to a Brampton Mortgage Broker like myself or a real estate agent to see how much value loss you should account for.
