A foreclosure is when the owner doesn’t pay their mortgage payments or property taxes and the home is seized by either the bank or municipality to be resold.
Since the economic downturn of 2008, “foreclosures” has been a hot word in the world of North American real estate. Many homes in the US were foreclosed when homeowners couldn’t afford their mortgages. In Canada, because of the buoyancy of the housing market during this time, and the different mortgage lending rules, foreclosures are far less common.
Most Canadians have likely never encountered a foreclosure, let alone purchased a foreclosed house. Unlike in the US, Canadian owners who don’t pay their mortgage payments have their homes taken by their lender and are listed publicly like any other home; the sale price is usually similar to comparable sales in the area, so you don’t automatically find great deals in these situations.
There are scam websites out there that claim to have foreclosure listings for Canada that are well below market value. These sites have sign up fees or membership fees, giving you false listings. Beware of sites that look like government websites but are actually just trying to extort money out of people. Speak with an agent about foreclosures if you’re interested in learning more.
In Canada, a foreclosed property can be based on not paying property taxes, which is extremely rare. The houses are listed separately by the government and put into a sealed envelope silent auction. Bidders must pay up-front in cash and take the home as-is.
Potential buyers are not able to go inside the home—as it still belongs to the previous owner—so everything is based on the package produced by the municipal representatives and any other documents. Prices are significantly lower, but the home condition cannot be guaranteed, the transaction could be cancelled at any time, and evicting the former owner can take months to years.
Also, up until the closing date, after you’ve won the auction, the original owners of the home could still pay their taxes, thus nullifying your offer completely. It can also be difficult to get title insurance, since the bank doesn’t know the state of the interior of the home.
Long-story-short, foreclosures in Canada are not what you’ve seen or heard about during the American real estate crash. These complicated sales also rarely appear, especially not in busy centres like Toronto or Vancouver, so it’s best to work with an agent to find a value buy rather than trying to chase a foreclosure.