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Foreclosure in BC: What You Need To Know – Part I

The F-word in real estate.

Everyone is curious when they see “Court Ordered Sale” or “Foreclosure” in a listing they find while browsing homes. In this new series, I will take you through the foreclosure sale process in British Columbia, and hope to demystify it and to dispel some of the common myths about foreclosure. I was inspired to write this series because currently, I have 2 foreclosure listings in Sooke, and a good deal of time is spent explaining the process to prospective buyers. Buying a foreclosure listing is not as simple as buying any other house, and there are many pitfalls to avoid and processes to follow if you want to be successful. I won’t get into the details of how the foreclosure process happens and the legal steps necessary before a court can order the property sold. Instead, I’ll pick it up where it becomes relevant to buyers – when the listing hits the MLS® system and the sale process begins.

Foreclosures are always a bargain, right?

Not necessarily. Remember, this is a court-ordered sale in most cases. The court is involved to make sure that the home owner’s rights are protected, and that he or she is not taken advantage of by the lender and the prospective buyer. The court decides if the terms of the purchase contract are reasonable and fair. For example, let’s imagine a home owner who has fallen on hard times. His home is in good condition, worth about $300,000, and he only owes $100,000 on his mortgage. He stops making payments, and through a long process, the lender finally gets authority to sell the property. It is unlikely that a judge (called the Master in foreclosure proceedings) will approve a sale for, say, $125,000 because clearly, the bank is trying to dump the property and leave money on the table that could go to the buyer.

The important thing to remember about foreclosures is that they are market-value transactions, in most cases. If a foreclosure is listed at a bargain-basement price, chances are it’s for a good reason, needing repair or maintenance. Also, at court, anyone can show up with an offer on the property, so sometimes an auction-like situation is created at court. More on this in a later post, though.

How is an offer on a court ordered sale different?

When you offer on a regular listing, typically, your REALTOR® will insert several clauses in the offer to purchase that allow you to do your due diligence on the property – inspection, approval for financing, research on the title, etc. When you offer on a foreclosure, in some cases, you’ll need to have your ducks in a row ahead of time – you must write an offer subject only to court approval. If you are the first buyer to offer, you will usually be able to write an offer subject to the regular conditions, but this is not always so. And, if you write an offer with conditions, the lender will not set a court date until after you remove your conditions. However, if there is already a contract in place – another buyer has already offered, done due diligence, and removed their conditions – you’ll have to compete at court for the property, submitting a sealed bid at court. This means spending money on an inspection, appraisal if necessary, and getting your bank to approve the financing of the property, all before you have a contract in place. This represents a little bit more risk than a typical sale, because it’s completely up to the master at court which buyer will be successful.

So, your REALTOR® prepares the offer, and it is submitted to the lender for consideration. A typical back-and-forth negotation will likely occur, and once consensus is reached, and any conditions have been removed, the lender’s lawyer will set a court date for the offer to be approved (typically, 2-3 weeks from acceptance of your offer). I’ll talk about the court process in the next post.

If you have any questions about foreclosures in BC, contact me and I’ll be glad to try to answer!

Tim Ayres – Sooke Real Estate Professional

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  • Pingback: Foreclosure In BC – Part 2 – At Court | Sooke Community and Real Estate Blog

  • Artshoppe

    Hi Tim  My home is in foreclosure and the bank has conduct of sale.  Do I have any rights with respect to being told when there is an offer on the home and how much it is for?  Thanks,  SH

  • Generally, you will not be involved with the sale at all if the bank has conduct of sale. You will not have a say when it comes to the offer. What will happen is that the bank (or the bank’s lawyers) will consider any offers made, and if they accept one, it will be registered in court, and you will be notified through your lawyer if you have one, or by mail. The notification will be a draft court order, typically, which will state the buyer, price, and contemplated completion date. If you believe the price is too low, you will need to prove that in court, usually by way of an appraisal. It’s really hard to prove that a property that’s been on the market for a while with an agent is being sold off too low, so usually these arguments are defeated at court. Your best bet is to follow along in the case, and get legal advice or help from a lawyer on how to respond to the various documents you’ll be served with. You can often buy yourself time by being polite, respectful, and genuine in your efforts to resolve the situation. If you can cooperate with the agent showing your house to prospective buyers, he or she might keep you informed also. 

  • Joel Convery

    Hi Tim,

    We are in Fernie, BC and are interested in putting in an offer on a court ordered sale.  A court date has already been set for the property (14th November) and there is an offer in on it.  

    Does this mean that we should be able to request the offer value from the listing realtor.  We’ve had our buyers agent request this information, but it’s not forthcoming.  The listing realtor is implying that the process for this property is somehow different.  

  • S.A.

    Hi Tim-It’s my understanding that a foreclosed property is sold on an ‘as-is-where-is’ basis, without regard to the condition of the property when it was first viewed by the prospective purchaser.     Is it practice for
    the bank to remove any appliances or fixtures/things of some value to sell and try and recover money before the prospective purchaser takes possession?

    Thanks – S.A.

  • Hi S.A. – Thanks for the comment and the great question. Yes, it is true that bank foreclosures are sold as-is, where-is. It is not common practice (in my experience) for a lender to try and recover value by selling chattels like appliances – there is just too little money in that sort of thing and no organized way to do it. However, don’t assume that the appliances or anything else of value will be there when you take possession, especially if the owner is still living in the house. They’ll often take with them or sell off whatever they can. 

    • S.A.

       Thank You – The property in question is a condo, the suite is empty and the locks have been changed.    It seems unlikely that the owner will be able to gain entry to the suite, and I got to wondering about the banks interest in this.   Thanks again!

  • tony

    when you lose your home to foreclosure are you legally obligated to clean it, my girlfriend just lost her house and is on dialysis and quite sick and unable to clean her house and property and is worried theyre may be repercussions. thank you

  • Don

    How long after an offer has been accepted should the lawyer be a obligated to call and get a court date? It’s been 4 days and no date has been set. Keep getting the tomorrow tomorrow deal. Thanks.

  • Shelly

    We were advised by the realtor that GST is still outstanding on a foreclosure property that we are interested in. Is this commonplace?