For those looking for a deal, distressed and foreclosed properties (called “power of sale” in Ontario) can offer a great opportunity. Lenders are looking to unload the property and will often offer a discount to do so quickly. But the process of buying a foreclosed home can differ a little from traditional home sales. Here are some things to consider before you make an offer on one of these properties.
“As-Is”
Angry homeowners that are in the process of losing a home can feel like they have nothing left to lose. Faced with the prospect of losing their house, homeowners sometimes leave the place stripped of anything valuable or useful, including door knobs, fixtures and wiring. While you can get the place at a discount, it might only be a bargain if you’ve got some DIY skills. This shouldn’t necessarily discourage you from buying, but you’ll need to figure out if the cost of repairs will offset the discounted offer price.
Know what to expect
A lender has no history with the home they are selling in these cases, so don’t expect to get a run-down of problems before you move in. A foreclosure might be a good deal, but it can also turn into an unexpected adventure. A good home inspector and/or contractor visits can help sort out the details.
Don’t Assume They’ll Take ANY Offer
While a foreclosed home can often be a bargain, you shouldn’t expect the lender to accept a lowball offer. Even in a market flooded with foreclosures, a bank might balk at a low offer, preferring to wait until housing prices bounce back rather than take a huge hit on the investment. However, you can use other ridiculous offers to your advantage and still land a deal at a good discount.
It Takes Time
Most mortgages are backed by large banks which means you will likely run into a large, slow-moving bureaucracy when trying to buy. With a traditional home sale, you can expect to find out if your offer has been accepted within a day or two. But when buying from a financial institution this process can take weeks. So have patience!
A Different Kind of Sale
Banks have their own processes and procedures for selling a home in foreclosure, which can make the purchasing process feel a bit foreign for buyers. There are caveats written into sale agreements that protect the bank and these are often long and confusing. I can help sort through these items to make sure you know what you’re getting into!