Looking at Foreclosures

Posted: April 28, 2010 in Buyers, General Information, Sellers

Foreclosure has been in the news a lot recently. Whether you’re worried about losing your house or looking for a bargain property, it can be a complicated issue. The term foreclosure is popularly used to refer to any property being seized by a bank or lending institution. In Canada, there are many different processes through which this can take place. The legal names of the most common processes are power of sale and judicial sale, which is also known as judicial foreclosure. Foreclosure is when a house is seized by the lender of the mortgage because of unpaid interest and/or principal on a mortgage. The bank or mortgage company then sells the property.

Although most mortgage contracts give the lending institution the right to take action after one missed payment, the banks would rather help you get back into good standing than go through the expense and hassle of foreclosure. Most advisers say the key is to be proactive and call the bank immediately to explain what happened.

In Canada there are two main types of foreclosure proceedings. One is called judicial sale in which the court is in control. It is used in Alberta, B.C., Manitoba, Quebec, Saskatchewan and Nova Scotia. The other type is power of sale in which the bank drives the process. It is used in Newfoundland, New Brunswick, Ontario and P.E.I.

There is a redemption period in which you can pay what is owed. Once that period is over, the lender proceeds to seize your house.

While a foreclosed house may be a great deal, you could find yourself saddled with many unforeseen costs such as unpaid property taxes and utility bills. There could also be a lien, an outstanding loan that used the property as security, against the house. It’s a good idea to do a title search to see if there are any other mortgages or liens on the property before you buy it.

Once the property is seized, the bank has the right to sell the house by auction to the highest bidder, by private contract or by tender where people submit bids in sealed envelopes.

Under a judicial sale, which is used in most provinces, the bank owns the property and gets all the money once the costs are covered. In provinces that use a power of sale process, there is a slight chance you’ll get some money. The order of payment is the cost of the sale, mortgage interest, mortgage principal, any other outstanding bills such as taxes or liens against the house, security deposits to any tenants and then, if there is any money left over, you would get it.

Remember that if the sale of the property does not cover what you owe the bank, it can sue you for the difference.

Once a foreclosure certificate or default judgment is obtained the former owners have no legal rights to the property.

The best way to find out about foreclosures is via the internet. You can sign up and get email alerts of new properties for sale as they go on the market. We’ll do all the wading through and you get the benefits.

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