Edmonton Foreclosure FAQ
If this is your first time exploring the Edmonton foreclosure market, you probably have lots of questions about the difference between a foreclosure real estate sale and a regular one. Here we've collected some of the most commonly asked questions in one place to get you started.
- What is a foreclosure?
When someone purchases a home, they almost always have to borrow money from a bank or lender to do so (called a "mortgage"). If the borrower stops making payments on the loan or mortgage and can't pay the outstanding debt, then they forfeit their rights to the property. In turn, the lender will try to sell the property to recover the amount outstanding on the loan or mortgage.
- What kinds of foreclosures are there?
There are three kinds of foreclosures in Canada.
- 1. Bank Foreclosure A financial institution takes over ownership of the property from the borrower, and sells the property in order to recover the costs.
- 2. Mortgage Insurer Foreclosure When a bank is unable to sell the property, they will call on the mortgage insurer to step in and pay out the bank. At this point it now becomes the responsibility of the mortgage insurer to sell the property.
- 3. Judicial Foreclosure When both the bank foreclosure and the mortgage insurer foreclosure options have been exhausted, then the property will be handed over to the courts. The courts may also take possession of the property when the property tax is not paid.
- What are the risks associated with buying a foreclosure property?
The primary risk to the buyer when purchasing a foreclosure is that the property is sold "as is where is", meaning there is no recourse once possession has been taken place. This risk can be mitigated by taking appropriate steps to protect oneself as a buyer prior to the completion of the purchase. This could include similar steps and techniques buyers use when buying regular real estate, including having an inspection done, or having a contractor quote the cost of repairs prior to making an offer.
Lawyers are used to ensure that title is clear prior to transfer, as with regular property transactions.
- How does buying a foreclosure property differ from buying regular real estate?
Buying a foreclosure property differs from buying typical real estate in a few key ways:
- The foreclosure property is sold "as is where is"
- In some circumstances, conditions are not allowed in the offer: it must be unconditional.
- Often a property can be purchased significantly below market value as the lender has only one interest, which is to cover as much as possible the amount owed by the borrower.