This website is designed to provide information on foreclosures from a real estate perspective. There is a lot of information and I've tried to organise it in layers of complexity for your convenience. Buying a foreclosed home has some unique considerations for you to be aware of. Hopefully you find this site useful.
Bank foreclosures are formal summary proceedings through the courts, initiated by a bank on a borrower (owner) who is not fulfilling the terms of a mortgage, usually through a default of the mortgage payments. (See Foreclosure Process for more.) The vast majority of bank foreclosures are court-ordered sales, which means the owner still owns the property but the lender (seller) has been granted the right to sell it. To protect the owner’s interest, the courts are involved and are required to approve the sale (including approving the price the property is being sold for).
In the Vancouver Island Real Estate Board area (from the Malahat northward, excluding the Victoria area), typically about 1% of home listings are foreclosures. In today's tight market we had only 21 sold foreclosure listings for 2019, 0.2% of all listings.
You’ve likely heard stories of people obtaining foreclosure homes at astoundingly low prices. While this can be the case (and more often in the US), in Canada homeowners usually are held responsible for any short fall and the bank can pursue them for the balance owing. Therefore, the court process tends to protect the home owner and their investment, resulting in fewer homes being sold for prices significantly lower than fair market value.
In order to accept a price much below the appraisal, the lender must demonstrate to the court a valid reason for the lower price. How it typically works is the
lender obtains an appraisal of the home, then lists it a little above the appraisal price. Only if the lender does not receive any acceptable offers after listing it for a period of time, will
the lender reduce the price or consider lower offers. The lender cannot simply sell the property for the amount the owner owes them, but must attempt to get fair
market value, or as close to that as possible, to protect the owner’s interest.
Once an offer is accepted by the lender the offer goes to court for approval, and on that court date, anyone can appear and put in a competing offer. This is usually done by having the potential buyers submit one round of sealed bids (though the process can vary), and this can result in the property selling for higher than the original offer, or the current listed price. I have witnessed sales at market-price levels, and occasionally even above market-price levels (which is likely due to buyers getting caught up in the competitive process). With realtors having the automated ability to identify foreclosure listings and email them to clients, often there can be many potential buyers watching a property, ready to jump in when they think the price is right. The unfortunate fact is, the better the deal, the more likely a higher number of competing bids will come in, typically driving the price higher. In 2019, 33% of bank foreclosures sold above the current asking price, suggesting there were competing offers on the court date.
The foreclosure home buying process can be long and stressful, and it has some unique risks. On the surface, a foreclosed home sounds like an opportunity to gain from someone’s unfortunate situation. As we see from above, the process (requiring court approval and the allowance for competing bids) greatly reduces the chance of getting a really good deal. Also, with the strong seller's market there are fewer foreclosures these days.
On the other hand, for a variety of reasons, some home sellers with regular listings are very motivated, and will accept a lower price than market value, or asking price. With regular listings, there is also less chance of competing with other buyers, and offers only need to be accepted once, with no second chance on a court date for other home buyers to get involved. As well as, many fixer-uppers appear in regular listings, often providing a good opportunity to build some “sweat equity”. Watching and evaluating regular listings can also produce some very good results. It is your choice to decide which process is best for you.
To see bank foreclosures or regular listings on Vancouver Island go to the Searches page. Unfortunately, searches on this site, or any third party site are not 100% complete. Only the public MLS® site or PCS can give you 100% of the listings.