Buyers won't find U.S.-style fire sales on foreclosed homes
Last Updated: Monday, February 23, 2009 | 3:02 PM ET Comments47Recommend28
CBC News
In the U.S., properties, such as this house under foreclosure in Oakland, Calif., can be sold for what is owed to the bank, but Canadian law states that foreclosed properties have to be sold at market value. (Paul Sakuma/Associated Press)
Alberta buyers shouldn't expect the same rock bottom prices on foreclosed homes in this province as advertised on U.S.-based television channels and websites, says the head of the province's real estate agent association.
Ads promising deals are hard to avoid, especially in Calgary where low prices on foreclosed properties in Arizona are advertised on local radio stations.
But Alberta Real Estate Association spokesman Bill Fowler is warning buyers that the situation in Canada is different.
"We see a lot of these late-night talk shows — 'Buy foreclosed property $300 down.' Well [it's] not happening in Alberta quite frankly," he said.
'There has to be an appraisal done on it and the appraisal has to be done at market value.'—Bill Fowler
Unlike in the U.S., where properties can be sold for what is owed to the bank, Canadian law stipulates that foreclosed properties have to be sold at market value, Fowler said.
"There has to be an appraisal done on it and the appraisal has to be done at market value," he said.
"It's not in the bank's best interest either, to sell it under market value. Understand that they have other mortgages in the marketplace and that would disproportionately affect those other mortgages. So if I am selling property at a distressed price, the value of my other mortgages may go down. So it doesn't serve the bank and it certainly doesn't serve the client, and it's not fair to the client either."
Fowler said buyers need to know that there are risks since they are buying "as is" with no warranties. He sold one rural listing to an investor, even though the person being foreclosed on wouldn't allow anyone on the property.
"Talk about buyer beware," he said. "When you buy a property in a normal procedure, there are warranties and representations made that provide you with some protection."
'They aren't that good a deal'
Real estate agent Francesca Serafini said foreclosed homes are often sold sight unseen.
"That could be due to a tenant and it also could be due to the state of repairs that the property requires. Sometimes they are former grow-ops, but it's not disclosed and banks don't have to disclose that," she said. "Don't be amazed that if you come into the house on the day of possession and the fridge you saw and the washer and dryer you saw are gone. "
Serafini said despite the risks, she still encourages buyers to consider foreclosed properties, as long as they are cautious and know what they are getting into.
Calgary house-flipper Keith Wagner has been hunting for good deals on homes with potential for a decade, and he isn't excited about foreclosed properties.
"They aren't that good a deal. Foreclosure is just one other stream of properties that are available," said Wagner.
Earlier this month, the Canadian Real Estate Association predicted house prices nationally will fall eight per cent this year as the number of Multiple Listing Service sales tumbles 16.9 per cent to 360,900 units.
But Canada's housing sector has not faced the level of foreclosures and financial problems reached in the United States in the past year, the Canadian Home Builders' Association noted last month. For instance, only 0.3 per cent of Canadian mortgages are 30 days in arrears, compared to 4.3 per cent in arrears for 90 days in the United States.
"Albertans are managing their resources, managing their mortgages in an exemplary fashion," Fowler said.
Homeowners who are concerned that they might lose their job or won't be able to afford their mortgage in the future should talk to their bank right away, he said.
Friday, February 27, 2009
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