Although foreclosure statistics are hard to come by in Canada, Foreclosures Canada Information Systems (FCIS) an investment company that keeps an eye on foreclosure proceedings at various courthouses revealed recently that in Alberta, foreclosures are on the rise.
What does this mean for savvy homebuyers looking for a great deal? Well, there is a possibility you could come across that much-anticipated diamond in the rough but that diamond could also be a lot more trouble than its worth.
Unlike in the US, Canadian homes in foreclosure must be priced at market value not at the amount owed to the bank. For this reason, its unlikely youll be able to buy a house for $15,000.
And because you have to go through the court system when purchasing a foreclosure, rather than through an individual seller, the process takes time and the court doesnt want to deal with any conditions that would slow it down.
Without being able to place any conditions on a deal including conditions based on the results of an appraisal or approval of financing placing a mortgage on the property can be difficult.
In cases of high ratio loans (or down payments less than 20%), you may be approved by a lender but then rejected by the mortgage default insurer. This could occur because the insurer has access to information you dont and there are faults with the house that you wont find out about until you move in. Without the insurers backing, the lender wont provide funding, and you could be stuck with an offer on a house but no money to fund it.
If youre thinking about picking up a foreclosed property, talk to your mortgage and real estate professional first, to fully understand the pros and cons involved.