How does a repossession work?

Where can I find repossessions?

A repossessed house is a house that has been seized by creditors. The latter is then resold in order to recover the money that the former owners owed to their financial institution.

Before, you could find repossessed houses at very good prices, but today, this is not always the case. However, it is still possible to find repossessed houses sold at 10% or even 20% below market value. Either way, you’ll still save money, but there are a few things you should know.

Indeed, this is not a sale like any other. Wondering how a foreclosure works? 10-Trucs therefore offers you tips and advice for finding a repossessed loan.

Tips and advice for buying a repossession:

1. Have a repossessed house inspected

Many of these repossessed houses have been little or badly maintained and sometimes completely abandoned. It will therefore be necessary to have a pre-purchase inspection carried out by a certified inspector. This will be all the more important because you have no legal guarantee offered by the financial institution when it comes to repossessing finance.

These are therefore sales at the risk and peril of the buyer, and you will not be protected in the event of a hidden defect on a repossession of finance.

The building inspector will do a visual inspection of the house you want to buy, and can tell you what work will be required. But since this is a visual inspection only, there are some details that the inspector will not be able to detect. Indeed, the building inspector cannot see under the floors, inside the walls, etc. However, it may be possible to obtain additional time in order to have an expert’s report made.

Be aware that an inspection can cost between $500 and $800, and that’s not counting the costs of an expertise if it is necessary.

Once the report of the inspector or the expert in hand, you can decide to buy, or not, the house in repossession of finance.

2. Provide for a deposit at the time of the purchase offer

It is not uncommon for a deposit of around $1000 to be requested at the same time as you submit your offer to purchase. But this deposit will be refunded to you if your purchase offer is not accepted by the bank in question.

Down payment to buy a foreclosure

Note that you will also need to provide a down payment to buy a repossessed house, as with any home purchase. And don’t forget to provide funds for the renovation of the property.

Don’t forget that a down payment of less than 20% will require you to have your mortgage loan insured by CMHC, even for a foreclosure!

Make a purchase offer valid for at least 72 hours

Once the institution has received purchase offers, it will take the time to study them before making a decision. Your offer must therefore be valid for at least 72 hours. If the financial institution has received more than one offer to purchase a repossessed property, expect them to come back with a counter-offer. The property will then likely go to the highest bidder.

3. Have the transaction notarized

If you are the lucky one, you will then have 30 days to have your transaction notarized before a notary, generally appointed by the financial institution.

Otherwise, penalty charges may be required by the Bank. Good to know, notary fees are the responsibility of the buyer. You will therefore have to add this amount, often around $1000, to your budget.

4. Where can I find repossessions?

To do this, you can consult the newspapers, the classifieds and of course the Internet, in order to quickly find some interesting financial foreclosures.

Your real estate broker also has access to the list of houses and properties in foreclosure, and can find the rare pearl for you.

To be immediately informed when a new foreclosed property comes on the market, you can subscribe to an automated service. Several real estate agencies now offer this service.

5. Don’t Forget Other Fees

Buying a repossession is usually a great bargain, sometimes as much as 10% of the market value.

On the other hand, do not forget that other types of fees apply:

  • building inspector
  • notary
  • insurance
  • renovation, etc

Not to mention that if you put less than 20% of the sale price down, your mortgage will have to be insured by CMHC, which adds to your monthly cost. Do your homework and, if possible, get help from a real estate broker.

If you also want to sell your house I suggest reading these tips and tricks: Tips for selling your house.

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