Foreclosure properties exist where the owner of the property has defaulted on their mortgage and the lender has commenced legal proceedings against the borrower to force the sale of the property so the mortgage can be repaid. Because of the circumstances of the foreclosure sale, it can be possible to obtain property for less than it would otherwise be sold.
If you are interested in learning more about the risks and rewards of buying foreclosure properties in Alberta, our Edmonton real estate lawyers can help!
How do you buy a foreclosure property in Alberta?
Your realtor should be able to direct you to local listings that are foreclosure properties. From the purchaser’s point of view, the main difference with buying a foreclosure property is the identity of the seller.
There are two ways to buy a foreclosure property in Alberta. The first is through a judicial sale. If you make an offer to purchase a property that is currently going through the foreclosure process, the court, if satisfied with your offer, can make an order confirming the sale and vesting title to the property with you as the purchaser. In this case, title to the property is never transferred to the bank or lender.
If there is no appropriate purchaser at the time of the proceedings, the court orders the foreclosure and transfers title to the property to the bank. In these circumstances, the bank will list the property for sale and you may be able to buy the property directly from the bank.
What are the risks associated with buying foreclosure properties?
The bank or lender does not want to take responsibility for the condition of every foreclosure property it sells. Therefore, the primary risk of buying a foreclosure property is that it typically does not come with the guarantees of a property purchased from the previous owner. There may be ways to mitigate these risks, such as buying title insurance and performing the necessary inspections to the property to be confident in its condition.
Another risk, especially with judicial sales, is that it may not be possible to attach conditions to your offer to purchase the property. This can cause difficulties in terms of arranging financing and can also make it difficult to obtain the necessary inspections.
Lastly, there may be delays related to buying a foreclosure property that you would not experience buying a property through traditional methods.
The potential rewards of buying foreclosure properties in Alberta
Typically, the incentive to purchase a foreclosure property is the idea that you are getting a “deal” because the bank only cares about covering its costs. However, in Alberta, the foreclosure procedure doesn’t allow for selling a property significantly below its market value. If the owner of the property still has equity in the property above what they owe to the lender, the goal is to ensure that the owner receives that equity back once the property is sold.
However, in a hot market, where properties are regularly sold above market value, it may be possible to get a foreclosure property for a reasonable price.
Speak with our Edmonton Real Estate Lawyers
There may be specific risks and rewards of buying foreclosure properties in Alberta that apply to your situation. Schedule a Consultation today for more details. We are proud to represent clients across Alberta.
*Disclaimer: Please note the content in this article is not intended to act as legal advice. For specific legal advice please consult with a real estate lawyer.
