You hear this term being thrown around by seemingly savvy real estate investors, telling their friends how they hit a homerun by buying a property nice and cheap. They know a guy, they heard a tip, they got there first; it always sounds so impressive and out of reach. After all, you need to be “plugged in” and a real risk-taker to find (and then buy) property in foreclosure, right? Well, not really. You just need to understand what it’s all about, and then connect with the best Real Estate Broker for helpful guidance and advice. Buying foreclosed homes in Montreal is very realistic and potentially lucrative, if you know the pros and cons and are patient.
What Exactly is Foreclosure?
In Canada, the general definition according to Superbrokers.ca is:
“The legal process that takes place when a borrower defaults on his or her loan and is deprived of the interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the loan debt.”
That makes a “foreclosure property” any piece of real estate which the Lender (banks, trust companies, credit unions, etc.) seizes and sells to pay off a defaulted mortgage. In other words, calling in the collateral. The institution’s interest is simply to recover the balance of the funds extended to the Borrower, who has stopped making reimbursement payments. Under normal circumstances, any qualified buyer (individual or group) who makes an acceptable offer is permitted to purchase this property. Because of the lack of emotional attachment by the bank (now the seller) and the urgency of liquidating the asset, the property may go for lower than market-value price. In other words, potential for a great deal to the buyer!
These are also sometimes known as “Bank-Owned”, “Real-Estate Owned”, or “Repossessed” homes.
Recognize the Differences
How is buying foreclosed homes in Montreal different from typical real estate transactions? First off, you usually don’t find these in your usual listings of homes for sale in your area. The other characteristics appear below. The quicker you pick up on these, the faster you can move with the odds in your favour. Very often:
• Most of these homes are now empty, so you’ll usually take possession quicker.
• Only one Realtor is involved (yours) which may mean quicker turnaround.
• May take many offers on many houses to land the right one at your desired price.
• The building is delivered “as-is”. Spot the deficiencies quick, because you’re the one who will have to fix them.
• Forget playing hardball or waiting them out in a lengthy negotiation. There isn’t much room for that.
• Before accepting any offers, the Seller’s side may require proof of preapproval from your lender. Come prepared.
Don’t Go Cheap on the Inspection
A proper building inspection by a qualified professional is smart for any real estate purchase, but when buying foreclosed homes in Montreal, it’s even more crucial. The seller (remember, it’s a bank) has very little motivation to fix any deficiencies, nor will they analyze the small stuff with a magnifying glass. It’s strictly business to them, and the house is very possibly in rough shape. Make sure your offer includes a condition that will allow you to back out, dependent on the inspection findings. Invest in a top-notch experienced Inspector, and take the full package, to make sure no costly problems go unnoticed.
Waiting to find a good house in a good location in foreclosure, and being there at the right moment, may take quite a while. Start with an access to foreclosures hot list. Even after finding the right place and submitting your best offer, it could be weeks before you get an answer from the bank. Stay the course with patience. Buying foreclosed homes in Montreal can require lots of administration (aka red tape) and necessitate several approvals on seller’s side, before they respond to your offer. To make the wait less painful, request that your Broker keep you updated during the wait.
Find a Broker with Experience
Buying foreclosed homes in Montreal often gets into much back and forth communication with the seller (remember, it’s a bank) which is very time-consuming and requires quick thinking. They also speak a different lingo than you’re used to, and the contracts don’t look like your typical residential agreements. Look for an experienced Broker with a solid understanding of foreclosure procedures and obligations and Quebec foreclosure laws (seizure of immovable property). Just like any other real-estate dealings, the right Broker often means the difference between success and failure.