The foreclosure process is a mystery to many people.
There are many misconceptions about purchasing a foreclosure property.
It’s more complicated than making an offer on a home that is not in foreclosure.
And if you have found yourself in a situation of nearing a foreclosure, here are some ideas on how to potentially avoid a judicial sale or foreclosure.
That judicial process begins with a demand letter sent to the borrower, which gives the borrower a short amount of time to pay off the mortgage.
Once the demand letter is sent to the borrower, a petition is filed in the B.C. Supreme court which starts an action called the Order Nisi, a process which gives a redemption time to the borrower, usually about six months.
This can be done by the borrower attempting to sell the property.
After the Order Nisi, one of two things will happen.
The petitioner will chose to have the property listed for sale by the court by way of a judicial sale through a realtor.
Under that scenario, the lender will receive an order approving the sale where the borrower will be responsible for any shortfalls between the borrowed amount of the mortgage and the sale amount.
The second option for the courts is an order of absolute foreclosure, which occurs if:
* the redemption period has expired,
* the property is worth the same amount as the mortgage debt or more,
* the respondent borrower is judgement-proof (i.e. no assets or money to apply towards deficiency), and
* There are no offers under a judicial sale.
Under those circumstances, the lender can seek an absolute order of foreclosure, under which the lender becomes the new registered owner and all borrowers are wiped off title.
No further action can be taken against the borrower after the court has granted the order absolute.
Once a judgment is placed against a property it is placed on the market with a realtor. At this point, a buyer can make an offer on the property.
The purchase process for a foreclosed property is not like a property that is normally listed and not subject to foreclosure.
Under foreclosure, what happens then is the buyer makes an offer to purchase the property and there is a subject period where the purchaser removes subjects such as financing, appraisal, home inspection,etc.
If subject-free, the offer goes to court and the vendor’s lawyer presents the offer to a judge
The judge asks if there are any other parties in the courtroom who want to submit an offer. If not, and the offer is market value, the judge will approve the sale.
If there are competing offers the judge will instruct all parties including the original purchaser to leave the courtroom and resubmit their final subject free offer in a sealed, envelope to the vendor’s lawyer.
After all offers have been submitted, the judge reviews them and approves the best offer.
And all the offers made at the court level must be subject-free offers.
So even if you have an accepted offer on a foreclosed property, there is a high likelihood that there will be other offers once you reach the court proceedings.