Calgary Foreclosures: Are They Worth the Risk?
As you scour through the listings online of homes in Calgary, foreclosures might spring up occasionally in your searches. This isn’t your average real estate purchase, but some of them seem like fantastic opportunities for investments or cheaper real estate.
But what are you missing? Are there details to this foreclosure that you need to be aware of? Should you take the plunge and jump in with both feet? Or would it be wise to hang back to discover what else you need to know about purchasing foreclosed properties? In the spirit of full transparency, let’s take an honest look at repossessed homes in Calgary and what you need to know about their purchase and use.
The Foreclosed Calgary Home
What is the definition of Calgary foreclosures? In most cases, if an owner fails to make 3 consecutive monthly payments to the lender (often cases the bank), the lender has the right to foreclose and reclaim the property. This property is then sold off to recoup the costs of the lender’s original mortgage. The advantage for you is that lenders are looking for quick recoveries and often list the homes at lower-than-market rates.
There are some exceptions to note. Other similar homes on the market include seized properties as in the case of grow-op homes (remediated homes are considered safe for normal resale by the AHS) or estate auctions in Calgary.
What do you need to know before considering a purchase of one of these homes?
Use a Professional for the Purchase
Many of these homes come with specific rules and regulations surrounding their purchase, use, and resale value. For example, a grow-op home that has been seized by the RCMP is not eligible for a mortgage and must be purchased in cash for the full value. It must be deemed remediated and safe by the Alberta Health Services before you can even live in the place. Other rules around purchasing, bidding, and reselling the home exist for even normal Calgary foreclosures.
This seems like an obvious tip, but use a professional. Hire an expert real estate agent with experience in cheap Calgary real estate. Use a lawyer as well to negotiate through the specific laws associated with your purchase. Some foreclosures are on uncompleted homes, new houses that owners simply ran out of money to complete. You might have to get the home finished as a stipulation of the purchase, so take a contractor with you for inspections.
Know the Market Value
Spurred to action by glamorized reality shows, many people believe that foreclosures are automatically cheaper purchases. The law in Canada state that a foreclosure must be sold at a “fair market value”. That means that, depending on the market timing, a foreclosure might be more expensive than it seems.
Get to know the current market trends, because you might either have an advantage, or you might be unintentionally paying more than you should.
Be Ready for The Surprises
Ever hear that term “expect the unexpected”? I never liked that term, because once you expect it, it’s no longer unexpected. When you purchase a foreclosed home, you have to be ready for surprises, many of them nasty and costly. That “cheap” purchase price can add up when you discover the foundation is cracked, the walls have rot, or the house is not level. Keep a budget for those surprises because they will come.
Understand the Purchase Process
Here in Alberta, we use a Judicial Sale model where all offers are subject to the court’s approval, often made public, and made in secret directly to a judge. Ultimately, you are dealing with a bank, so they will be less willing to adjust the price based on bids received. But as a rule, we often see the price adjusted every 30 days or so, as the banks become more motivated to liquidate the asset.
For the most part, foreclosed properties in Calgary are usually seen as an investment, and made by previous homeowners looking for good capital returns. It’s not often a first-time buyer new to the real estate market looking at foreclosed properties. No matter if this is your first house purchase or not, let us help you along the way. We have decades of experience and know what it takes to get you your dream property. Call us on 587-316-5400 as well getting us on email at [email protected].