In a market like ours, it’s almost impossible to sell a home below market value. When the bank forces the sale of a home, it’s marketed the same as any other home and sells at fair market value too. The stories of real estate investors picking up repossessed homes, and flipping them for a profit are fairy tales from Florida.

If you have been scouring the web for a Foreclosure or Power Of Sale list, or an agent that specializes in foreclosures, you’ve probably come to a sad realization. Some Realtors use “Foreclosure” and “Power Of Sale” as keywords to get Buyers to share their contact information. They promise a “Foreclosure and Power Of Sale list” but then send you regular listings found on Realtor.ca. But, why aren’t there any Foreclosure lists, or agents with special Foreclosure access in the Greater Toronto Area?

We actually have very few power of sales and foreclosures in the Greater Toronto Area. It’s probably something to do with the fact that most homeowners have a significant investment in their homes. The last 1-5 years have been a godsend to any homeowner in the GTA. Homes in the GTA have benefitted from a 40-50% price increase in the last 5 years. These homeowners would do anything to protect their investment. So, when they get into financial trouble, they sell their home. Luckily, in this market, they can sell very easily too.

Let’s take 2 sentences and describe the difference between power of sale and repossession. Both are the forced sale of real estate, but with power of sale the owner keeps title and with repossession the lender takes title. With both, the home is listed on the MLS and the lawyers will only look at offers after a reasonable amount of time on the market. That means if the home is priced low it will get enough attention to bid the price up.

Rarely, there are discounts on foreclosed properties. However, the condition of the properties and the additional risks balance out the discounts. When buying a foreclosed property, the offer is 5X thicker than the traditional offer. The offer is very one-sided. The bank asks you to take full responsibility in the instance there are squatters, the house is looted, the lender won’t give you a mortgage, or the title insurance company refuses to give a policy on the home.

Obviously, there are cynics that will tell me I’m wrong… Anytime something below market value comes up for sale, we have clients lining up in droves to get in. Once inside we realize why the home is marketed so low. Distressed homeowners will tear the interior of the home apart before willingly giving it up for repossession. These make great deals for renovators or flippers, but not someone looking for a move-in ready home.

But if you do find a foreclosure property, what should you expect

Buying a foreclosure or power of sale is very different from buying a traditional home. There are many exterior dangers with these sales, so it’s very important to close as soon as possible. We’re talking about getting possession within 2 weeks. There is the possibility of squatters, the appliances being stolen, or the homeowner coming back to try to take possession of their home before you close.

the home is sold as-is and that's a problem

Foreclosed homes are sold as-is. While you might not mind those 4 letters, it means you will have trouble getting financing, insurance, and title insurance. While banks sell homes as-is, they do not finance them; if you find a home you love that is marketed in as-is condition, you will have to get a non-traditional mortgage, which will cost you thousands more. These homes also have trouble getting insurance, which will end up costing you extra monthly. They are also difficult to cover under a title insurance policy, which means higher closing costs, as well as less protection from title fraud.

the bank and the agent hired to sell the repossessed home have fidicuary duties

In Ontario, power of sales are far more common than repossessions. Power of sales are a much quicker process, but it means the owner keeps title. The bank is entitled to the money they are owed but the owner is entitled to any remaining money from the sale. That means if the Realtor selling the home sells it for less than market value, they could face legal prosecution from the original owners. This is another reason why power of sales and repossessions aren’t as big in the GTA as they are in the states.

How to get the best deal on a new home

If you’re shopping for a deal, which I assume is why you’re looking at foreclosure properties, I’ll give you a few hints. Look at homes with terrible pictures, and a bad description. Chances are the lack of good photos and the bad description is probably putting off many buyers. In rooms with carpet, check inside the air vents to see if there is hardwood underneath the carpet. Look for homes that need cosmetic upgrades like paint and carpet, because that is relatively cheap compared to new wiring, roofing, HVAC, windows, and siding.

how we work with investors

The best deals are found when you’re not eagerly shopping for them. So we go about our daily searches for clients, and when we find a fantastic deal, we contact our investors. To buy and sell real estate for a profit is an art and takes patience. If you’re shopping for an investment property, contact us. When we come across investment properties all the time, we will be more than welcome to share them with you.