The Best Way To Purchase Foreclosures In Canada?

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Most Canadians have heard about homes being foreclosed on left and right in the beleaguered U.S. Housing market. Many papers are running advertisements that promise to show Canadians how to cash in on undervalued properties south of the border “Florida waterfront apartments for dimes on the buck, anyone? What Canadians may not realize is that foreclosure isn’t a uniquely American phenomenon. Though the incidence is comparatively low in our stable real estate market, properties are foreclosed on every day in Canada. What’s a foreclosure, how does it work, and what are the benefits for the average Calgary consumer who is looking out for a home?

What’s a Foreclosure?

Foreclosure results when a householder misses sequential payments to his or her bank (sometimes 3 months of payments) and has no means to catch up. This is called distress, and it almost always leads to foreclosure. Once a lender starts the method “typically after written notice of a missed payment has been given to the borrower, and more than 15 days have elapsed with no payment – it is extremely tough for the home-owner to reverse it; legal charges and interest fees pile up swiftly and unless the home-owner can come up with a giant sum of cash, the property will ultimately revert to the lender.

When the foreclosure process is complete, the bank can sell the property and keep the spoils to pay off its mortgage and any legal costs, and on top of that, if there’s a recourse clause in the mortgage, the mortgagee “to paraphrase, the mortgage holder, the bank “can go after the house owner for the remainder if the sale doesn’t bring enough to pay the current balance of principal and charges.

It is a distressing situation, all right. We wouldn’t wish such a distressing experience on anyone. That being said, it does occur. Once the home has been repossessed by the lender, it’s fair game for purchasers. That is where you, as a customer, come in.

2 Sorts of Foreclosures in Canada

So that you can understand the language “and with a little luck avoid this occurring to you, ever – there are 2 main ways that a foreclosure can happen in Canada.

Foreclosure by legal sale, often referred to as legal foreclosure, involves the sale of the mortgaged property under the supervision of a court, with the takings going first to fulfil on the mortgage; then to any other lien holders; and, finally, the rest goes to the mortgagor (the borrower, homeowner) if anything is left. Under this system, the lender initiates foreclosure by filing a lawsuit against the borrower.

Foreclosure by power of sale, sometimes called non-judicial foreclosure, is obviously the more common form of foreclosure in Canada and it is made feasible with an easy Power of Sale clause being included in the mortgage contract. This process involves the sale of the property by the mortgage holder without court supervision. This process is generally faster and less expensive than foreclosure by judicial sale. The order of payout is the same as in a judicial sale, with the lender getting the proceeds of the sale first.

David Tsegai is Calgary lofts expert and property investment consultant

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