February 22, 2018
Foreclosure and Power of Sale are two buzzwords commonly heard in the real estate investment market, and there are many Canadian real estate investors who still believe they represent good opportunities and bargains to be had. This is a common misconception that needs to be dispelled.
Financial institutions and lenders have fiduciary responsibility
In Canada, financial institutions and lenders have a fiduciary responsibility to obtain “fair market value” for the property if the bank and its real estate professional is selling a home. This generally means the property must be listed on an “MLS” system or equivalent. Canadian lenders always have and will continue to demonstrate this high degree of responsibility when dealing with a homeowner’s property.
This is a landmark of the Canadian legal system that has differentiated (and perhaps shielded) our real estate market from our neighbours south of the border. As long as this differentiating factor does not change, the opportunities, as investors historically define it, will continue to be minimal.
Five things real estate investors should know when considering investing in a foreclosure or power of sale
Below are some points for real estate investors to consider when dealing with a foreclosure or power of sale property or considering purchasing this type of property:
- Not all properties are in distressed/dilapidated/deplorable condition. As in anything, there will always be a range.
- Generally, a foreclosure/power of sale will be sold in an “as is” condition. It doesn’t mean you won’t have the opportunity to conduct your own due diligence, however, it does mean there is less negotiating room, especially in a seller’s market.
- Right of redemption. Generally, mortgagors can reinstate the mortgage at any time. Be prepared to lose the deal.
- Pick the right realtor who is specialized in foreclosures and power of sales.
- Maintaining the property during the process. Depending on the province and legal system/process, it can be a long one. You have to be prepared to balance time and effort spent on such a property versus other opportunities.
Are you a real estate investor looking to better understand the foreclosure process? With more than 30+ years of experience in the delivery of cross-national property management services for any type of properties under administration as it pertains to foreclosure or otherwise, Veranova’s team of experts is here to answer your questions.