Foreclosures are a great potential to get a property at a great price. The foreclosure process in BC is different than buying a property the traditional way and you need to know how it works. When a property goes into foreclosure it's because the owner couldn't make their mortgage payment. The most common reasons for inability to pay are the property becomes unaffordable or the home owner becomes hospitalized for a long period of time.
At that point the bank that had given the mortgage becomes the owner of the property. The reason a foreclosure can be a good opportunity is because the bank's motivations are different from a typical seller. All the bank wants to do is minimize their risk and cover the cost while most owners want to make a profit and are sentimentally attached to their home.
That being said, BC laws prevent banks from selling only to cover their costs and need to sell for market value, or close enough at least. This is why the courts are involved and we'll get to that.
The Foreclosure Process in BC
Once the property is foreclosed the bank will assign a realtor to list the property and everything is business as usual. The first buyer to come in and put an offer on the property goes through the process as they normally would with their subject to financing, inspection and whatever else they wish. Once the details including price are sorted out between realtors and subjects are removed it has to go to court for approval by a judge. As long as the price is close to market value then the courts are happy.
Once you're in court for approval, things change a little bit. Before approving your offer the judge will ask if there are any other people that want to put bid on the property. At this point it's a bid and not an offer anymore. Because our courts are public other people know exactly what price you were willing to pay so outbidding you is easy. If there are others that are interested in the property, they will need to put in a sealed bid including you, so you do still have a chance to get your property. The judge will simply accept the highest bid. The other buyers have a huge drawback here which is they have to be ready to buy the property without any subjects including subject to financing. This means they need to be ready with cash in the bank and they don't have a right to an inspection or going over the strata minutes.
As long as it doesn't turn into a bidding frenzy, which is very uncommon, you will get your property. Most people aren't willing to bid blindly on property or have enough money on hand to buy a property out right. This is why foreclosures are a great potential and should be part of your search.
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