What is a Foreclosure?
It isn’t the best situation for a homeowner, but it could become one for a buyer. When purchasing a property, most people apply for a mortgage. As long as the whole amount of money isn’t paid, the property belongs to the mortgage lender. That means that if the payments aren’t made on time, the lender could evict the buyer and sell the property to recover the rest of the money. When that happens, the homeowner will receive a Notice of Default, informing them that the house will go to auction. That’s also the moment when the pre-foreclosure period starts. This process involves the sale of the mortgaged property under the supervision of a court. Briefly, a foreclosure means that a court orders a home be sold to pay off the mortgage.
What’s the Foreclosure Situation in Canada?
In Canada, the foreclosure scenario doesn’t happen as often as in the US or the UK. The banks have more conservative rules when it comes to lending and other financial institutions have more control over the mortgage approval. The homeownership is not encouraged for low-income households and both banks and buyers are more motivated to get realistic property appraisals. The typical mortgage here is for 25 years. Every five years, the interest rate readjusts to the current interest rate, encouraging the owners to pay off their debt faster.
In spite of everything, some people still have to face foreclosures. In these cases, you, as a future buyer might be interested in seeing the real estate listings and what advantages they offer.
What Advantages Does a Foreclosure Come With?
One common misunderstanding that comes along with this term is believing you can get a house way under its market value. There are cases when the property is sold under the market price, but usually the discount doesn’t represent more than 20%.
If you’re buying the house in the pre-foreclosure phase, the advantages are that you get to inspect the house and see what you’re buying and the purchase will be fast.
In the case of a foreclosure auction, you might get a reasonable discount. You must pay attention though because the downside of this kind or purchase is the inability to check the house beforehand.
Either way, take a good look at our foreclosure listings and let us know if you have found the property you were searching for. Don’t forget to schedule an appointment with us so that we can give you valuable advice before deciding. Our REALTORS© are experienced and real estate market savvy, so that you can achieve the peace of mind of knowing you’re doing the right choice.