# Any advice on buying a foreclosure?



## indexxx (Oct 31, 2011)

I just found a really great suite and have asked my realtor to start putting together an offer. It is a foreclosure property here in the Lower Mainland; just wondering if anyone has advice on picking up a foreclosed unit. I understand that you have to go through the court system and that after your've done your legwork on an offer, someone else can come in and outbid you- any advice or what to look out for or to ensure that I get the place?


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## birdman (Feb 12, 2013)

From my experience there are seldom any real screaming deals for the purchaser. As you mentioned, the sale must be approved by the court and if there is ample equity for the lender to be repaid in full they will normally recommend the offer to the court without worrying about the price too much. However, the owner of the property can, and often does, oppose the offer by coming up with higher priced comparables and/or an appraisal reflecting a value higher offer than presented. I would expect you will have to rely on your realtor to ascertain what other offers, if any, are around and perhaps what the financial institution needs to get paid out.


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## indexxx (Oct 31, 2011)

Thanks frase- the situation is that it has been on the market for two months, with REALLY lousy photos, so few buyers viewed it and the price has been dropped twice. One offer was made, somewhere around the current asking price, and at that time it was rejected. New photos were posted this week which is when I decided to view it (just got back- excellent condo) and its new asking price is in my range. So my hope is that I can get it unopposed.


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## Rusty O'Toole (Feb 1, 2012)

Foreclosure or power of sale? In either case, from the buyer's standpoint it is the same as buying any other property. The seller must secure title one way or the other. Of course you will need a lawyer to close the deal and he will take care of the title search.

If I were going to make an offer I would start on the low side but make the deal as clean as possible to the seller, with the minimum conditions. I have bought power of sale properties where my offer was not the highest, but was all cash, no conditions, and a quick closing. The seller took it even though there were other offers thousands of dollars higher.

Have also been in the position of selling a property under power of sale. I loaned some money on the property and the borrower did not make his payments. In that case, all I could get out of it was the amount owing. If there was any change left over, it went to the owner. So I didn't care what it sold for as long as I got my money.

In the case of a foreclosure, the seller would be in a similar spot. Being stuck with a property he did not want, because he loaned money to the wrong person. And might be glad to get rid of it at any price.

Don't be surprised if a few offers and counter offers have to go back and forth. That is normal in this kind of deal. If the seller took my first offer I would figure it was too high.


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## birdman (Feb 12, 2013)

It would have been interesting to know why the other offer got rejected and by who? Did the financial institution refuse it (I expect they have a "conduct of sale") before it went to court (which they can do) or did they support it and the owner created a fuss at the court house saying something to the effect that "it is worth way more than that and look at this appraisal"? I would expect the listing realtor would know the details on how much is owing and why the previous offer did not go through. 
Rusty, in BC it is a Conduct of Sale as opposed to a "Power of Sale" and your comments are correct that if their is any extra $$ they go to the owner but only after all charges on the title after the initial mortgage are satisfied. However, the owner always can oppose the sale and plead his case to the judge saying that the property is worth more than the offer. It happens all the time and for that matter is normally expected. If the property doesn't sell and eventually the court grants an Order Absolute and title then passes onto the financial institution (or other mortgagor). Any other charges on the title (subsequent mortgages, judgements, etc) are dismissed at this time unless, of course, they pay out or have the existing mortgage assigned to them. As a purchaser you always deal with whoever has the Conduct of Sale. I can't give any opinion on how much to offer, etc but any background info on previous offers and why they did not go through can only help you decide what you are up against. Good Luck


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## Just a Guy (Mar 27, 2012)

From your point of view, there really is no difference except the time you wait.

As was suggested, you should make your offer as clean as possible. All cash, no inspection, nothing. Of course, you can inspect the place as you look at it and before you make an offer, so that's no big deal.

Next, you go through the negotiations just like a regular sale, except it's slower...the bank sometimes took a week to respond, whereas I could counter offer in about 5 minutes.

Once the bank accepts the offer, it may not need to go to court...only about 1 in 5 of mine have needed four approvals, most of the time the bank has already gotten it out of the courts. If it has to go to court, the bank does it and you just have to wait. If another offer comes in it would also be considered by the courts (this is where the clean offer helps). 

Sometimes, the banks won't even counter offer, they just accept one of the ones presented if there are multiples. There is no rhyme or rhythm to the process, it all depends on who is handling the particular unit.

One thing though, we're getting towards the end of the year, banks like to clear their books and they go away for the last week...I'd get your offer in quick...they are quite motivated this time of year. Of course the paperwork may not get done until next year, but they can accept it and your on your way. I got two places last year at this time which I didn't expect because the offers were low (and one had five offers) but they both came through because they were clean.


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## indexxx (Oct 31, 2011)

Thank you all for the responses. My realtor told me today that the older offer got turned down by the bank- at that point they were asking about 12% more than what they are now. Today I asked my realtor to make an offer slightly below the current asking price so we'll see if it gets accepted. Should hear back late tomorrow or early Tuesday. Fingers crossed for a nice Xmas present to myself... :encouragement:


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## Rusty O'Toole (Feb 1, 2012)

Am more familiar with Ontario. Around here, the banks are very careful with Power of Sale properties to get an appraisal, and list the property with a major brokerage company and put it on MLS so no one can say any sale was not on the up and up. They might accept an offer 10% below appraised value, but only after several rounds of negotiations.

I suppose they figure a 10% reduction is not enough for anyone to sue over, and if they did the judge would throw it out.

After several months, 3 to 6 months depending on the bank, they will reappraise the property and drop the price if it has not sold.

All this to avoid any appearance of dealing in bad faith.

I will say, they are easier to deal with and more likely to give you a bargain this time of year. They hate holding a property over the winter because it is so likely to be damaged by bad weather.


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## Just a Guy (Mar 27, 2012)

Well, I agree with everything Rusty said except the price. I've found it all depends on the person making the decision as to how low they'll go on the price. I've had some lawyers (for the bank, these are the guys who make the actual decision) who will price things high and sit on it hoping to get close to that exact price or they won't sell. Of course, if it doesn't sell in the first round of listings, it may go to a different lawyer the next time it's listed. 

I've had some lawyers/realtors list it quite low and hope for a bidding war. 

I've had some places negotiate for months, I've had some places pick one offer seemingly at random. 

It also depends on the condition of the place too. If the place is messy, or needs obvious renos, they tend to go quite cheap. 

Of the 5 I bought last year, 4 were foreclosure (one was an estate sale). Each one of the 4 sold differently, however only one was close to list, each of the other offers was at least 15% below list. The places, looking at their histories, had sold for more than double before getting foreclosed on. All of them had "issues". Most needed renovations, one had a guy who refused to leave (making it impossible to show) who they had to evict. 

After the renovations, the places easily appraised at least 33% higher than purchase price so that we got 75% LYV mortgages which got the purchase price and Reno costs back in our pockets. Our average purchase price was around $75k, our average Reno cost was $5k plus time, our average appraisal was around $125k, average rent they generate is nearly $1100, their average value on their original
Sale before foreclosure was $175k. 

One more thing, remember to appeal the taxes next year. Even with the city's adjustments due to the sale, I was able to get those 5 places reduced by $170k in assessed values which resulted in a significant tax savings (important thing to a landlord). I appealed based on the purchase price, not the mortgage appraisal. There is no better time to appeal the taxes than the year you buy.


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## marina628 (Dec 14, 2010)

I bought a foreclosure about 5 years ago and the experience was very similar to normal sales.The agent told us the bank would likely only take $1000 off the price ,we offered $22,000 less and ended up setting for a $13,500 discount ,they wanted $182,000 and we paid $168,500 but we had no conditions and flexible closing dates.When we got the legal papers the liens that was discharged was over $230,000 ,first mortgage was $186,000 of that.


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## birdman (Feb 12, 2013)

Each foreclosure and sale is different and if an offer comes in at well below the list price and appraisal the F/I is likely to do try to facilitate the deal "as long as the net sale proceeds are enough to payout their loan or mortgage". If the offer is insufficient to payout the mortgage or loan they will want to get all they can to minimize their loss. Also, if any other parties to the action (the owners, other lien holders, etc) decide to dispute the offer to the court then the latter calls the shot. This is why I suggested that a purchaser should try to ascertain details on the foreclosure as it could assist in what they may be able to get the property for.


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## indexxx (Oct 31, 2011)

My realtor did the legwork and thought my offer was reasonable. All they can do is make a counter offer and we'll take things from there.


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## birdman (Feb 12, 2013)

I think you are on the right track and good luck!


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## indexxx (Oct 31, 2011)

My realtor called me- the bank accepted my offer this morning.


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## kwikemarket06 (Nov 6, 2014)

*Condos for Sale in Grande Prairie*

I am agree with Rusty O'Toole's views. You are absolutely right. And i am fully agree with your all comments. Please share more information. And indexxx i think you follow Rusty O'Toole.


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