Many families have had to abandon their homes due to the economic upheaval caused by the coronavirus pandemic. Yet property values in many neighborhoods remain high due to the drive to move from urban areas to suburban areas, offering opportunities for the intrepid investor.
Are you interested in purchasing, rehabilitating, and selling or renting a foreclosed property in British Columbia? Read on for some tips from the office of a Philadelphia bankruptcy lawyer. As well, check out our detailed blog post on foreclosures to learn more about the forclosure process in Canada.
Identifying a Lucrative Foreclosed Property
Property in suburban areas close to major highways or public transportation used to be the safe bet, and they still are. However, with more people working from home rather than commuting, desirable areas have expanded beyond those which are commutable to urban centers.
Take a look on Zillow, https://www.foreclosuresbc.ca/, or another online property search site to search for homes in foreclosure. You can also peruse the list of judicial sales or contact a local real estate agent for help in identifying homes that are in foreclosure, or that are in danger of foreclosure and being offered as a short sale.
If you plan to work on or manage the property yourself, take a drive and check out the properties you’ve identified. Are they currently occupied? Do they seem in good repair from the street? Remember, when you buy a foreclosed property you purchase it as-is where-is.
As you drive around, also canvas your neighborhood and the neighborhoods closest to you. Are there unoccupied homes that may be in foreclosure soon? How can you tell?
Telltale signs a home is vacant include:
- Overgrown lawn
- Shades closed, no lights on
- No car in the driveway
- Fliers and junk mail by the door or in the mailbox
- A padlock on the door
- A notice of vacant property tacked to the door
Search online for property against which the mortgage lender has filed for an “order nisi.” An order nisi sets the length of the redemption period for the borrower, during which time the borrower can “redeem” or pay off the mortgage and keep the property. The borrower can also sell the property during this time. The redemption period is usually six months, although the court can order that the redemption period be extended or truncated for cause.
One option is to approach the borrower and make an offer during the redemption period. If the borrower accepts, the property can be yours. And if you are an all-cash buyer, you are in a better position to negotiate with the borrower and the lenders to purchase short, however, be advised that approval to sell a property short can take months, whereas you take possession of foreclosed properties immediately.
If the lender applies for and obtains a “conduct of sale,” they control the terms of the sale of the property. At this point, they will sell or auction the property. You can make an offer, and if it is accepted the lender will schedule a court date for approval of the sale. Shortly before the court date, your offer price will become public and other investors may submit competing offers. The court usually accepts the highest bid, and completion of the sale is usually ordered by the court 14 days thereafter.
Purchasing a Foreclosed Property
Before you even consider purchasing a foreclosed property, you should have financing in place. Why? Because you must complete the sale 14 days after the court’s order is entered.
Be advised that conventional mortgages may not be available to you due to the level of risk associated with purchasing a foreclosed home. If you are eligible for a conventional mortgage, you may be required to purchase mortgage insurance and have additional inspections of the property.
What if the Property is Not Vacant?
If the former owners still occupy the property, you are required to apply to the court for a “writ of possession.” The court bailiff will assist you in evicting the occupants. Obviously, this will delay taking possession of the property.
If a tenant occupies the property, know that the tenant’s rights are protected by the Residential Tenancy Act. No court order is enforceable against a tenant unless the tenant is joined to the foreclosure action. Be sure that the lender joined any tenant to the foreclosure action, otherwise, a tenant in your property is protected by Section 38(2) of the Real Estate Services Act.
Rehabilitating a Foreclosed Property
Any foreclosed property will require, at a minimum, a thorough cleaning. Homeowners typically leave trash and personal belongings, and all of that must go. Know that homeowners who have been foreclosed have been known to damage the property in anger and don’t be surprised if that happens.
Have the property inspected for water damage, termite damage, rot, mold, and mildew. Is the structure sound? Is the roof leak-free? Are the major systems functional? Are the appliances present and functional? Sometimes the lender removes appliances from the property before the sale. Any carpeting in the home will likely have to be replaced.
If you are lucky, the property will need only a cleaning, a coat of paint, and a refresh of the landscaping. If not, the property will need some repairs and updating. Budget for the worst, because if homeowners in foreclosure did not have the money to pay their mortgage, they probably did not have the money for regular home maintenance.
Also, if you have not yet consulted with a local real estate agent about the potential value of the property if selling or renting, do so now. Avoid over-improving for the neighborhood as you are sure to lose money that way.
Selling or Renting a Foreclosed Property
If you intend to sell a foreclosed property that you’ve bought, hopefully, you’ve established the potential value using comparable homes in that neighborhood that have recently sold, and you’ve optimized your timeline to take possession and rehabilitate the property as quickly as possible. Time is money, remember!
If you intend to rent a foreclosed property that you have rehabilitated, know that you can manage the property yourself or employ a management company or a real estate agent to handle that for you. If you rent multiple properties, it may be prudent to get help.
In the case that you bought the property to rent and have a bit of income on the side, hopefully, the property is located close to your residence and convenient for you to manage. Have an electrician, plumber, and handyman on speed dial in case the tenant reports any problems with the property.
Best of luck!
About the Author
Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy bankruptcy and foreclosure lawyer in Philadelphia, PA.