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Buying a Foreclosure – Should You do It?

For years we heard about the great real estate deals that Canadians were taking advantage of in areas of the US like Arizona and Nevada. At one time, almost anyone could get a mortgage in the US. When a lot of those people started to default on their payments, the real estate market was flooded with thousands of foreclosed properties. After the meltdown, it wasn’t unheard of for properties in the US to sell for as little as one quarter of their market value.

Canada hasn’t experienced a mortgage crisis like the one in the US. However, people sometimes fall behind on their mortgage payments here too and banks are forced to foreclose. Having heard about the great deals on real estate in the US, many people in Canada wonder if foreclosures offer the same great savings here.

Real estate laws in Canada are different than laws in the US. Banks here try to sell foreclosed properties for a fair market value. A typical foreclosure in Canada usually represents a maximum savings of around 15% over market value.

If you are considering purchasing a foreclosed property, there are a few things that you should do:

  • If possible, have the house inspected before making an offer. Foreclosed homes are often neglected or damaged by the owners or former tenants. There are no guarantees when you buy a foreclosed house and you buy it as is. If you find out later that there was a flood and the walls are full of mould, you have no recourse.
  • Talk to the neighbors to find out as much as you can about the property. If it was used as a meth lab, it could be full of all sorts of toxic chemicals.
  • Do research to find out as much as you can about average house prices in the same area. Figure out how much you’ll actually save by buying a foreclosure.
  • Do repairs yourself if possible. If there is a lot of damage to the home, hiring professionals could easily erase the money you’re saving.
  • Be aware that if the house isn’t in the same condition on the closing/possession date as it was when you viewed it, you have no recourse.
  • Work with a real estate agent or a lawyer to make sure that the transaction goes as smoothly as possible.

For more information about buying a foreclosure or other properties in Calgary and area, contact Patrick Murray.

By Patrick Murray