Once upon a time, I was a landlord and owned a couple rental properties. As this may be old news to some of you, what you may not know is that I purchased one of the properties via foreclosure or bank sale.
As I’ve been a capitalist for as long as I can remember, it was a natural progression to look upon real estate to build wealth. After graduating from Engineering school, I had the vision of owning multiple properties and creating a large amount of cash flow.
With this vision, I was on the hunt for real estate bargains. One method which intrigued me was purchasing foreclosure/bank sale properties. What I liked about this strategy was that there was a potential for a rather large discount on a property without having to insult the owner with a low ball offer.
Here is the process of buying a foreclosure in Canada. Actually, this is the process I went through in Newfoundland which may be similar in other provinces.
Finding the Properties
In the local paper there should be a place where they announce properties that are being foreclosed on. In our local paper, it’s just after the classified ads. Within the ad, it should have the house location and the details of when the auction will take place. On the bottom of the ad, there should be a lawyer contact should you require more information.
When I was on the hunt, I took note of houses in decent neighborhoods, and called the lawyer regarding the details. As St. John’s is a relatively small city, I know the neighborhoods pretty well, so it was easy to spot a potential lead while quickly browsing the paper.
View The House
One thing to note about these properties is that not all of them are available for viewing. More of a take it or leave it deal. In my mind, it makes no sense at all to spend hundreds of thousands of dollars on something that you can’t inspect, so I cut these off the list. However, the lawyer contact will confirm whether or not the home is available for viewing, and when the “open house” will be. For the not so handy person, I would recommend taking an experienced carpenter or home inspector along for the viewing. Note though, these houses do not have any warranty.
I’ve done a couple walk through of foreclosed properties and they can be all over the map in terms of condition. I’m not an especially handy person, heck I hired a painter for a bedroom, so I gravitate towards newer houses that are in good shape.
Attend the Auction
This is where it gets interesting. The auction was held at the lawyers office boardroom with all the potential owners gather around the table. It’s what you imagine where they announce the starting price and people around the table bid in the hopes of winning the house. Before they start the bidding however, they disclose all the rules. In the auctions that I’ve attended, the winning bidder is expected to have a 10% down payment on the spot, or within a couple hours of auction closing. Some auctions have a “reserve” where if a minimum bid is not met, they do not have the obligation to sell the house.
Once the down payment is out of the way, it is expected to close the house within 30 days. From there, an appointment is setup with a real estate lawyer who takes care of the title search and closing the house. As mentioned, the house is taken “as is”, so it’s extremely important to view the house before hand.
In a future article about foreclosures, I’ll get into more detail about the specifics of my purchase.
Do you have any experience with the foreclosure process in your province/jurisdiction?