Process of purchasing a foreclosed house
The original offer for the foreclosed home goes in and is reviewed by the foreclosing company. If the offer is accepted a court date will be set for any additional parties, to put a bid on the property. Once the offer is accepted, the price is posted for the public to see.
At court, if no other parties show up the original bid wins and the property is theirs.
If additional parties show up, bids are sealed in an envelope and handed to the judge. At this point, the original bidder can adjust their offer. The judge will then unseal the bids and decide which bid is best for the foreclosing company. While the price is a large factor in this decision, he will consider other factors such as the closing date. The secondary factors are generally the tiebreaker if two bids are very close.
The pros of buying a Foreclosed home
When shopping for a foreclosed home, the lender is eager to recuperate their loss and will want to sell the property quickly.
They often sell the home at a lower price than it was initially. If you purchase the home through an auction, you may receive the house at a lower price.
Homes in BC go through an Auction Process. At Court, you’ll know what the official bid is. And know the base purchase price that you need to start.
If you are lucky enough to put the initial bid on the house, and no one shows up for the court auction, you’ll get the house for your initial bid.
This option can be beneficial if you’re a landlord with plans to buy and fix up cheaper properties and then rent them out.
If the property goes for a cheaper price, you can use the money you’ve saved for maintenance purposes or to make home improvements, thereby increasing its value and your home equity in the process. You may even be able to sell the property at a profit someday. Within Canada, you can add renovation costs into your mortgage to fix up the property for any maintenance wants & needs.
The cons of buying a foreclosed home
While foreclosed properties can be cheaper than the usual price, they are not rock-bottom prices, as you might have heard. Often, you would acquire the home at only a slightly cheaper price than it was initially.
Foreclosed properties can have a low initial bid. Once they go to auction, some people pay more than the market value.
The legal and financial procedures for buying a foreclosed home are stricter and more complicated than the average home sale.
Foreclosed homes are usually sold in a “what you see, is what you get” state, meaning you’ll have to cover all repairs/renovations by yourself. This means that if the owners are still in the house while being foreclosed, any damage they cause will come out of your pocket.
Any possessions left by the previous owner are your responsibility