At one time in Canada finding a power of sale or foreclosed property could provide deep discounts for buyers wanting to pick up real estate for the cost of a car. Okay, not always quite the cost of a car, but certainly bargain- basement prices.
On the heels of the 2008 financial crisis, Americans were losing their shirts in the real estate market. Homes were going for much less than the mortgages people held on them so what did they do? They walked away. Some left behind big palatial houses, while others were more modest. Either way, at the height of the housing crisis streets were lined with vacant homes and the only run on anything was for plywood used to board up windows.
But that saying that from tragedy comes triumph certainly applies to those who snapped up foreclosure sales in the U.S. for a song. And plenty did. But foreclosure sales south of the border are quite different than in Canada. There, foreclosed homes need only collect the amount that’s outstanding on the loan and buyers stand to make sweet deals at cut-rate prices.
Selling real estate far below what it’s worth won’t cut it in Canada. That’s because lenders are mandated to sell power-of-sale properties for fair market value following strict guidelines that prove the foreclosed building is being sold for a fair and reasonable price.
Buyers of foreclosed properties in Canada bear more of the burden because these homes are sold as is, with no warranty or representation. That means you get what you see so hidden deficiencies, chattels such as appliances and issues around encroachments or land surveys all fall on your back. While these issues can happen with any purchase, a buyer can list these items as conditions in the offer to purchase, which pushes the responsibility back onto the seller. Ensuring all appliances are in working order, disclosing the home’s serious defects and allowing the buyer the time to obtain home inspections and reports that check for encroachment and building codes then become the responsibility of the seller.
While there’s no guarantee, foreclosed homes are often in sub-standard shape in terms of coming with appliances, fixtures and other items you might expect in a regular home purchase. Often this is because the when homeowners are alerted that their lender is foreclosing on their home, angry homeowners sometimes respond by damaging the home and taking everything with them.
The courts typically give the foreclosed homeowner six months to repay the loan and reclaim their property. Sometimes, though, a home will go on the market in that time so the new buyer could be left high and dry if the original owner pays up.
That power of sale you’ve been thinking about isn’t as appealing as you may have thought. Unless you’re buying south of the border, you may be better off purchasing a fixer-upper that’s been on the market for a long time.