Whether you’re looking into purchasing an investment property or searching for a home in Ontario to call your own, you may have come across the term “foreclosure” in your real estate search. Foreclosure properties come with their own baggage but can be an interesting purchase if followed through correctly and you’re properly represented by the best Kingston real estate team.
What is a Foreclosure?
A foreclosure is a house or property that has been seized by the bank for nonpayment of a mortgage. This means that the property is now owned by the bank, which is selling the property with the intention of making back the money left outstanding on the mortgage.
The foreclosure process for a homeowner isn’t something that happens quickly. It’s usually the result of a financial disaster or strain put on owners that suddenly makes them unable to keep up with their mortgage payments. One missed payment is enough to start the foreclosure process, however, there are options for homeowners to try and prevent it from finalizing (such as making a payment plan, etc.)
The foreclosure process is similar to the following:
- A payment (or a series of payments) defaults. The bank will send a Notice of Default within a certain period of time (a couple of weeks or a couple of days). They’ll probably try and call first to try and work something out.
- Once 1 to 4 payments have defaulted (for a Power of Sale foreclosure), the foreclosure process truly begins. Homeowners are given a month to vacate the home and surrender it to the bank. If the bank must go through the judicial process to evict owners, it can take months of legal back and forths before the eviction is finalized (faster if the owners don’t file a Statement of Defence). In a Power of Sale, which has been happening more often lately and is included as a clause of the initial mortgage documents, the entire process can take even a few short weeks.
The Pros and Cons of Buying a Foreclosure Property:
The obvious perk of a foreclosure buy is that, if the mortgage was worth less than the market price of the home, then they likely aren’t going to ask for anything more than what the house is worth – or less if they want a quick buy. Any money left after a sale has been made and the debt has been paid will actually go to the previous owner of the home. If the home goes to auction, it might be sold for quite a bit less than its value.
Something that’s important to look out for with foreclosure sales is that there is definitely going to be a lien registered on the property for the mortgage which may require a few more steps to delete from the title of the home if the bank didn’t clean up the title before the sale. Don’t worry though, the right legal team will do all the required steps to make sure that the property you’re purchasing is rightfully yours with no liens (unless you’re registering your own mortgage) against the property.
Foreclosure properties are almost always picked up fast and in an “as is” state. Buyers probably won’t be able to ask for an inspection of repairs as conditions of the Sale. These, as well as any possessions the previous owners left behind, are all up to you to take care of, including paying for the inspection itself. Perk, though, is that you probably have money left in your home budget to make the fixes the house needs. And, if the inspection comes out not as nice as you thought, you can make the decision on whether you want to go ahead with the purchase.
Other than that, the purchase process of a foreclosure property is pretty simple and similar to that of a normal home purchase – if not slightly stricter. Having Kingston’s most trusted real estate team on your side will ensure you get the best price and the smoothest purchase, so you can be in your new home or in possession of your next investment as fast as possible.
Reach out for a conversation with Jordan McGregor and the Real Estate Reimagined team today to find out if there are any foreclosure properties in the Kingston area.