The Skinny on Foreclosures

Posted by Ashley Turner on Wednesday, January 23rd, 2019 at 1:40pm.


Today, let's talk about foreclosures! The word itself conjures up a lot of imagery to people. Some perceive them to be the holy grail of real estate deals, while others seem to think of foreclosures as a condemned home, with boards over the windows and squatters taking up residence. Obviously the truth falls much closer to the first scenario (although usually not an enormously smoking deal as some think they are, but we'll touch on that more later), but the fact of the matter is, they do represent a unique real estate opportunity and buyers would do well to educate themselves a bit on the realities of foreclosures. That's what we're here for.

Let's talk price first. While it's true the property isn't being listed by the owner, and therefore there is no emotional component involved...that still doesn't mean the lender wants to just firesale it to get it off their books. It's important to note the lender has a duty to sell the property at fair market value, through a REALTOR®. This means those whoppin foreclosure deals you may have heard about, or perhaps even on those ultra-realistic real estate reality shows, probably aren't too accurate. If you want to really have a blast, read about foreclosure law in Saskatchewan! What, you don't want to crack open that textbook? Weird. Ok, well let me just sum up the most important section of that law as it pertains to price: a foreclosure cannot be sold at a deep discount in order to protect the pricing integrity of the neighbourhood. So much of real estate pricing is all about comparables (or, "comps" in our language) - one wildly low sold price could conceivably torpedo the value of an entire neighbourhood, so naturally, that can't be allowed to happen with foreclosures. In reality, they're priced like almost every other house, although since there aren't any emotionally invested sellers involved, it is rare they are significantly overpriced. The price you see on them is typically right at market value, as perceived by lender/REALTOR® analysis. There is no short sale approach at all, the bank will almost never let it go for less than mortgage.

And as for condition of foreclosures, again like most standard listings, it's a pretty mixed bag. It is true I have walked into foreclosures that look like they just survived a 100 person Slayer moshpit - but that's absolutely the exception, not the rule. For every one of those I've seen, I've seen thirty that look like any other house. It is true they usually lack the bells and whistles compared to other active properties listed, but surely you didn't expect a perfectly staged home when the bank has ownership. The reality is, expect to walk in and see a perfectly habitable house, albeit without a lot of lipstick and gloss.

Sensing a pattern yet? Basically, a foreclosure property isn't that different from the thousands of other homes on MLS®. One thing I will touch on before wrapping up, is the offer process. Obviously, that represents a different scenario - like I mentioned above, there is no emotional component here, which is typically such a big part of the offer stage, so it's strictly a margins game. If the offer makes sense financially to the agent and accompanying parties, it'll likely be accepted. If it doesn't, it'll be a cold, emotionless "nope". Bottom line when it comes to foreclosures is there really isn't anything to be scared of, or no particular reason to get overly excited either. These homes are listed on the MLS and by the time they get to that point, they have usually undergone several appraisals by formal appraisers as well as a REALTOR®. Sorry, I would love to regale you with brilliant tales of buyers swooping in and dramatically offering and getting a foreclosure for $40,000 less than market value on the first day of the market. I also would love to paint a scene that makes foreclosures look like the most miserable scenes from The Wire. But like most things in life, the truth is far less sensational with foreclosures. As long as you understand some basic fundamentals of how they work and have an agent that does proper digging in terms of the home's history (as they should, with any used house), you'll be in a good position to approach these properly. And if you ever want to talk foreclosure law in greater detail, please allow me to take you out for a beer or something, since there is no topic that is more thrilling to me!

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