Foreclosures - the mystery revealed
Is a court ordered sale a good deal? It is generally a good deal, however, it is not a steal in most cases and here is why. The court protects the rights of the original owner to get “fair market value” for their home and the system is set up that way.
The first step in this lengthy process is the mortgage holder asks their Realtor to determine a fair market value for the home. This is done in the usual way with recent comparable homes used to get a starting price. It is then put on the market and the MLS system to see if buyers want it at that price. If it doesn’t sell right away and there are other comparable homes that have sold for less, then the price is reduced.
The second step is when a buyer comes along and puts in an offer that is accepted by the mortgage holder. This is done in the usual manner with an offer, subject clauses that protect the buyer, and finally after subjects have been removed, a firm and binding offer subject to court approval. The basic details of the accepted offer such as price and deposit are made public knowledge at that time. Then the fun begins!
The third step is that a court date is set after the original offer is accepted. It is on a Tuesday morning in
Court ordered sales have some restrictions for buyers. For example, all court ordered sales are sold “as is, where is”. This means that buyers do not have the protection of a home inspection, or a property disclosure statement. The original Buyer cannot ask the Seller (The Bank) to help with any needed home repairs.
If you are thinking of showing up with your Realtor to try and take the home at the court date, you must be prepared. Your offer has to be “condition free” with all mortgage requirements met, or you have to have cash in the bank. Your offer should be more than the original offer and you have to include a substantial deposit cheque.
While there are many hurdles to a bank foreclosure sale there is the potential to buy a home at under market value. Depending on the property you may even be the only one interested in which case you win! However, there are less protections for a Buyer, especially when it comes to disclosure of the homes condition. Perhaps the biggest disappointment to offering on a foreclosure is that someone else could come along and in a hearbeat take the home after all of your hard work.