Buying a Foreclosed Property
Buying a foreclosure is similar but not the same as purchasing a typical resale home. For this reason, it is so important that you use a REALTOR® and because it can be a tricky process you should definitely use a realtor that is experienced in foreclosure sales.
Here is the process when buying a foreclosure:
- If you find a property you like, with the help of a REALTOR®, make an offer. This offer will be similar to any typical real estate contract, but will be accompanied by a Schedule A (an amendment to the contract). The most important thing in the Schedule A is a clause that states that you will be purchasing the home “as is where is”. What this means is that at any time after you’ve made the offer the home as you know it can change. For example, there may be lights missing, new holes in the wall…etc. In a normal transaction, the seller would have to fix these changes before you become owner. With a foreclosure, you receive the home “as is where is” meaning you cannot sue for compensation to possible changes.
- If the owner (the lender) accepts your offer and you remove subjects, you then have to wait for court approval. During the time that you await the court date the home can still be viewed by any interested parties and all buyers will know your accepted price.
- At court and potential buyers can bid on the home. All interested buyers, place their subject-free offers along with deposit cheques in an envelope to be presented to the judge. If you have the accepted offer, you also have a chance to change your offer in order to compete with other bids.
- The judge will review all offers and choose the best offer. Once the best offer is chosen the property is considered sold and all conveyance is done to complete the purchase.
- The new owner typically completes and takes possession anywhere from 2 to 4 weeks from court approval.