Foreclosed homes can be attractive to some new Varsity home buyers but not to others. In Alberta, foreclosed homes go up for sale on a regular basis. Foreclosed homes can be a good deal for the right person. If you're a home buyer who is interested in purchasing a foreclosed property, it's important for you to understand what that means. It's also important for you to know what a foreclosed home is likely to be like.
How Foreclosure in Alberta Works
It's important to fully understand the foreclosure process. Foreclosure in Alberta begins when a homeowner misses a mortgage payment. The first missed payment is usually addressed by the bank with a letter or phone call. If the homeowner responds by making the payment, the incident is closed, although the homeowner may have to pay a late fee.
One the second missed payment, the lender sends the homeowner a demand letter. The demand letter is a demand for payment and a notice that the formal foreclosure process will begin if the homeowner does not pay. If the homeowner still does not respond, the bank will send a notice of foreclosure claim. The bank may require the homeowner to pay for lawyer fees in addition to the money already owed for missed payments. At this point, it's possible for the homeowner to pay the money and escape foreclosure, but as the missed payments and other fees build up, this becomes harder and harder.
Why Buy a Foreclosed Property?
Foreclosed properties can usually be purchased for a fraction of their value. Home buyers seeking a good deal, buying on a budget or looking for the perfect property at a low cost are often attracted to foreclosures.
What are the Risks and Downsides of Buying a Foreclosed Property?
Unfortunately, there can be many risks to buying a foreclosed property. Buyers who are considering purchasing a foreclosure should be aware of these risks before they commit to a purchase.
Foreclosures are frequently very damaged when the foreclosure finally goes through. Sometimes the property suffers damage because the homeowner is unable to keep up with maintenance while in financial distress. Other times, properties are damaged by homeowners who are frustrated and angered by their impending foreclosure. Some property owners are simply negligent Buyers who purchase a foreclosed property may be faced years of work to repair the house and restore it to its potential. Not all homeowners are prepared to take on years of repairs.
Sometimes Damage is Hidden
Hidden damage is a risk with any property. However, foreclosed homes may be more likely to have hidden damage than homes that have been well maintained. Home buyers who purchase a foreclosed property often buy their home with crossed fingers, hoping that they won't later discover a mould or structural problem that could cost them thousands of dollars.
Remodeling Often Requires Cash
Most home buyers on a budget, the kind of people who are attracted to foreclosed homes, are new home buyers with little money in the bank. After making the down payment on a home, many first time home buyers do not have the start up capital to make an extensive remodel.
Unfortunately, most foreclosed homes need an extensive remodel. Often the very home buyers who would be interested in buying foreclosed homes are themselves not able to put down the money required to make the repairs.
How Can You Tell if Buying a Foreclosure is Right For You?
The best people to purchase a foreclosed property are those who have a DIY attitude and a healthy sense of adventure. People who buy foreclosed homes like to do things on their own, have a lot of experience fixing things themselves, have tools to make home improvements, and often have experience making significant repairs.
Home buyers who do not know how to make repairs, who are not able to use tools wisely and who don't own any tools may not be the best candidates for purchasing a foreclosed property. If you're thinking about buying a foreclosed home in Alberta and you're not sure whether this type of property is right for you, talk to a real estate professional. Your real estate agent can help you decide whether or not you're ready to purchase a foreclosed property.
Ask your real estate agent to take you to see some foreclosed properties. Once you've seen a few, you'll have a better idea what kind of damage is typical for foreclosed properties, and whether or not you're ready to make that kind of purchase.