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How to buy a Foreclosure in Edmonton

Buying Foreclosures in Edmonton, Alberta

What Is A Foreclosure?

A foreclosure or foreclosed home is when someone who borrowed money secured by a mortgage on a property stops paying and the lender wants to realize their security. Essentially the lender applies to the court for an order transferring the security (the property) into the name of the lender. The lender may then sell the property to pay back the loan.

What Is A Judicial Sale?

People frequently refer to a judicial sale as a foreclosure. There is a key difference. With a judicial sale, the court sells the property. The proceeds of the sale pay off the loan or as much of it as possible. The court also attempts to sell the property as close to fair market value as possible. The title to the property never transfers to the bank or financial lender. In a judicial sale, the borrower, usually the homeowner, retains a right of redemption. This means that they have the opportunity to bring the mortgage current and keep the house.

How to Buy a Foreclosure

Foreclosed properties, like the vast majority of Edmonton homes for sale in our province, are listed on the Edmonton MLS board. When the listing comes on the market, we will see it – and so will you, if you have signed up with us to receive new listings. Every foreclosure, estate sale or bank-owned property, will be a little bit different when putting in an offer. Depending on the rules and regulations set forth by the lender, the court or the executor. Some foreclosures in Edmonton mush be cash unconditional offers, while others are treated the same as any other property.

Pros and Cons of Buying Foreclosures

Foreclosure and Judicial sales of Canada homes are more common in the United States. However, if you have been living in Alberta for a while, you will be well aware of our surplus of Edmonton foreclosures from the crash of our economy in 2007. It is now 2020 and Alberta house prices have not changed since. Before you start looking into buying a foreclosed home, it’s important to understand the inherent benefits and risks involved.

Pros:

  • The lender, eager to recuperate their loss, will want to sell the property quickly and is usually priced below its true market value. If you buy a foreclosed house, it is sometimes possible to get an even lower price. Any liens, backdated taxes, or outstanding mortgage payments remaining on the property will be expunged, as these factors would make it harder for the lender to resell the home. At the time of closing, your real estate lawyer will make sure your title is free and clear of all encumbrances.

Cons:

  • While foreclosed properties can be cheaper, they are not rock-bottom prices, as you might have heard. More often than not, you would acquire the home at only a slightly cheaper price than it was initially unless you have done your homework. Knowing the absorption rate and having your Realtor complete a buyer's comparative market analysis for you will help determine whether or not you have made a great investment.
  • The legal and financial procedures for buying a foreclosed home are more strict and complicated than the average home sale. Although your real estate lawyer will make sure your title is clear at the time of closing, it is a good idea to double-check your property title a few months after you move into your home. Not all of the old sellers' creditors know the house foreclosed.
  • Foreclosed homes are sold in a “what you see, is what you get” state, meaning you’ll have to cover all repairs or renovations by yourself. You’ll also have to get rid of any possessions that may have been left behind. This means if a stove was in the property when you last viewed it and now, it is gone, there is really nothing that can be done.
  • The terms of the mortgage contract may absolve the lender from any of these responsibilities, as well as any future liability for the property. If there are a foundation, hydroelectricity, or zoning problems, they are your responsibility. No warranties will be offered. It is a good idea to have a property inspection on a foreclosure prior to making an offer.

Hire an Experienced Realtor

Since buying a foreclosed home is more complex, having a professional realtor will be more necessary than ever. Not only can they help you find the right property, but they’ll also facilitate and guide you through the whole process. There are a lot of different steps you’ll need to go through, including inspection and a court date.

Tips on moving into a foreclosure

  • Consider the significant costs involved with buying a foreclosure home. Remember, a foreclosed property might need some work before it’s safe to live in. If you can’t afford these costs (as well as your payments), hold off until you can find a more suitable property. Consider the expenses that don’t even relate to the initial price, such as:
  • Utilities that need to be switched on as soon as possible - make sure you have ownership documentation. The previous owners may have outstanding utilities and you don't want to pay for them.
  • Change the locks. The sellers will not be happy they have lost their home to foreclosure, or the bank may have had tenants living there for a while.
  • Plan on doing a bit of landscaping. The grass may not have been cut for months and there could be doggie bombs in the yard.

Common Questions About Buying an Edmonton Foreclosure

#1. Can I get a mortgage on a foreclosed home?

  • Yes, you can. In most cases, purchasing a foreclosed home is an investment rather than a first home, so chances are you already have a pre-existing mortgage. If you don’t, contact us and we will help you through the process of getting a mortgage with one of our lenders so you can start searching for your first investment property.

#2. What is the risk of buying a foreclosed home?

  • Just like any type of real estate investment, buying a foreclosed home does come with a certain amount of risk. Being educated about the most common mistakes that buyers make when purchasing a distressed home will help you navigate the sometimes tricky world of foreclosure sales.
  • Don’t offer too low of a starting price. If you offer too low a price you will be rejected before ever getting to the auction stage of the foreclosure process. To avoid this common mistake, work hard with your Realtor to offer a realistic initial amount.
  • Never assume that your offer will be the only offer. You may need to adjust your original price if you want to pursue that bank-owned property.
  • Be prepared to lose in court. You may be outbid and end up losing your foreclosure sale at the very last minute.
  • Be prepared for some of the major risks. These include not receiving the home in the same condition as when you first viewed it. Another risk is that tenants still occupy the property when you take possession and may have to be forcibly removed.

#3 Do foreclosures get price reductions?

  • The longer a foreclosure sits on the market, the less money the bank is willing to take for that specific property, so sometimes patience is the key to saving large sums of money! Depending on the circumstances, the general rule is that the asking price will be adjusted once every 30 days to help generate interest in the property. Some foreclosed homes have sat vacant for months and even years.
  • The longer a foreclosure sits on the market, the less money the bank is willing to take for that specific property, so sometimes patience is the key to saving large sums of money! Depending on the circumstances, the general rule is that the asking price will be adjusted once every 30 days to help generate interest in the property. Some foreclosed homes have sat vacant for months and even years.

#4 How long does it take for a response, once I have written an offer?

  • In Alberta, the Real Estate Act favours settling foreclosures via a judicial sale, where a lender can only accept an offer to buy a property in foreclosure by going to court. The process can take days to several weeks, meaning other interested buyers can also write an offer after you have already submitted yours.

#5 Is a foreclosed home a good investment?

  • A foreclosed home can be a great real estate investment if you understand all of the costs associated with the project. A general guideline is that you should never pay more than 80% of the property’s estimated market value including any needed repairs.

Edmonton Foreclosure Summary

If done right, a foreclosed home can be a wise real estate investment that can provide you with an excellent rate of return.  Remember that every foreclosure sale is an “as is” sale, meaning: what you see on completion date is what you get. All of this information will be presented to you in a Schedule A form, make sure to go over it and understand it with your Realtor!


Our team of real estate and lawyers help when people buy foreclosures in Edmonton and the surrounding area. We help explain the risks of buying a foreclosure. We also explain how to mitigate that risk. Always seek this information and advice before signing any contract to purchase such property in Alberta. Connect today! Email your questions here directly. Also, feel free to call us at 780-910-5179.

Edmonton Homes for Sale
Contact: 780-910-5179

Contact Information

Audrey Abuan

780-910-5179

audrey@audreyabuan.com


Brandon-Lee Abuan

780-237-7074

brandonleeabuan@gmail.com

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