I recently found a house listed at a price that seems too good to be true. I discovered the house is a court-ordered sale as the result of foreclosure proceedings. Are there any risks when buying a foreclosure?
Yes, there can be risks associated with buying a foreclosure property. Foreclosure properties may be offered at a lower than expected price, but you need to know what you’re getting into. A foreclosure sale, which may be labelled “as-is,” “whereis” or judicial sale, is the sale of a property under the supervision of the Court of Queen’s Bench. In a typical foreclosure sale, the owner of a property is behind on their mortgage payments and the lender requests that the Court order the home to be sold.
The sale of the property is arranged through the courts in order for the lender to recoup the money owed to it. In a foreclosure sale, there is no guarantee of the property’s condition, no warranties, and a potential buyer can’t submit an offer that is conditional on anything – such as a home inspection or financing. In some cases, when buying a foreclosure, you can’t even see the inside of the property. This can create significant risk for a buyer. In a foreclosure sale, the seller typically won’t provide documents that are associated with the property, such as a Real Property Report and/or condominium documents. Without a Real Property Report, the buyer may not know the true location of the structures and the legal boundaries on the property. Likewise, without condominium documents, a buyer might not even know what the monthly condominium fees are. That being said, there are things you, as a buyer, can do to learn more about a property.
Searching the address online may uncover something. Likewise, in the case of a condominium, you can find out the name of the condominium management company and pay to obtain condominium documents from the company rather than from the seller. But remember that any offer you make for the property cannot be conditional on receiving and/or reviewing those documents. A court-ordered sale can be a very long process because it has to go through the Court. It’s not as simple as a seller accepting or rejecting an offer from a buyer; the Court ultimately makes those decisions.
There’s also the possibility that the sale could fall through at the last-minute in the event the property is no longer in foreclosure, for example if the owner gets caught up on mortgage payments. It is important to remember that nothing is guaranteed with a court-ordered sale. Even though foreclosures come with some risk, they can be a good option for some buyers – just make sure before proceeding you know the risks. “Ask Charles” is a question and answer column in Killarney/Glengarry Community Newsletter by Charles Stevenson, Registrar of the Real Estate Council of Alberta (RECA), www.reca.ca. RECA is the independent, non-government agency responsible for the regulation of Alberta’s real estate industry. They license, govern, and set the standards of practice for all real estate, mortgage brokerage, and real estate appraisal professionals in Alberta. Read the full original article here.