The British Columbia Real Estate Foreclosure Process

February 17, 2009 in Kamloops Foreclosure Info by Kirsten Mason | 20 comments

Kamloops and area home listings including judicial sales and foreclosed properties click here.

Foreclosure Home For SaleThe foreclosure process is a mystery to many people. There are many misconceptions about purchasing a foreclosure property. It is more complicated than making an offer on a home that is not in foreclosure. I want to shed some light on the process and what buyers can expect. Also, if you have found yourself in a situation where you are nearing foreclosure, this will help you figure out what to do to avoid a judicial sale or foreclosure.

Judicial process begins with a demand letter sent to the borrower which gives the borrower a short amount of time to pay off the mortgage. Once the demand letter is sent to the borrower a petition is filed in the BC Supreme court which starts an action called the Order Nisi that gives a redemption time to the borrower. The redemption period, which is usually six months, is given to the borrower to redeem the mortgage. This can be done by the borrower attempting to sell the property.

After the Order Nisi, one of two things will happen. The petitioner will chose to have the property listed for sale by the court by way of a Judicial Sale through a Realtor. At this time, the lender will receive an order approving sale where the borrower will be responsible for any shortfalls between the borrowed amount of the mortgage and the sale amount.

The second option for the courts is an order of absolute foreclosure. If the redemption period has expired and if:
1. The property is worth the same amount as the mortgage debt or more,
2. The respondent borrower is judgment-proof (i.e. no assets or money to apply towards deficiency) or
3. There are no offers under a judicial sale; the lender can seek an absolute order of foreclosure, under which the lender becomes the new registered owner and all borrowers are wiped off title. No further action can be taken against the borrower after the court has granted the order absolute.

Once a judgment is placed against a property it is placed on the market with a Realtor. At this point a buyer can make an offer on this property. The purchase process for a foreclosed property is not like a property that is normally listed that is not under foreclosure. What happens is:
1. The buyer makes an offer to purchase the property and there is a subject period where the purchaser removes subjects such as home inspection, title search etc.
2. The subject free offer goes to court. Once in court the vendor’s lawyer presents the offer to the judge. (known as the Master in Foreclosure proceedings)
3. The Master asks if there are any other parties in the courtroom who want to submit an offer. If not, and the offer is market value, the Master will approve the sale. If there are competing offers the Master will instruct all parties including the original purchaser to leave the courtroom and resubmit their final subject free offer in a sealed, envelope to the vendor’s lawyer.
4. After all offers have been submitted the Master reviews the offers and approves the best offer.

All offers made at the court level must be subject free offers. As you can see, buying a foreclosed property is not as simple as many think. Even if you have an accepted offer on a foreclosed property, there is a high likelihood that there will be other offers once you reach the court proceedings.

I have not seen many foreclosures or court ordered sales come on to the Kamloops market recently. I do believe however, that we will see an increase in foreclosures and court ordered sales in 2009 and into 2010. Many home owners are over extended with debt not only in their homes but also personal credit card debt, personal loans and loans on vehicles.

  1. Andrew on March 1, 2009 at 8:46 pm

    Thank you for this helpful article. I am a first time homebuyer and currently looking at a foreclosure, but as the seller is not too cooperative with letting me see the property, I am a little leary about what may be inside…

  2. Kirsten Mason on March 1, 2009 at 9:55 pm

    Thanks for your comment Andrew – I think that there is a misconception out there that foreclosure properties in Canada are a great deal. Often prospective buyers are waiting for someone to make the first offer to get the property to go to court. In court numerous buyers show up and the property usually goes for much more than the original list price.

    Good luck with your home search!

  3. Pati on April 1, 2009 at 11:37 am

    Thank you for your article.

    Is there a way in this recession market, that the borrower will not be held responsible for any shortfalls between the borrowed amount of the mortgage and the sale amount, during the judicial sale?

    Would appreciate your comments on this

  4. Kirsten Mason on April 1, 2009 at 9:04 pm

    Hi Pati,

    Thanks for your question. I know it is tricky to figure out what to do in such trying times. Unfortunately, the borrower will be held responsible for any shortfalls between the sale price and the borrowed amount. The best thing to do is contact your mortgage broker or local bank to confirm this as financial institutions may have other options for their clients.

    Have a great day.

  5. Pati on April 2, 2009 at 5:05 am

    Thank you for your comments.

    Have a great spring season !

  6. Susan on April 13, 2009 at 7:34 pm

    Is it possible for a morgage broker to sell a property that has a lein on it? and if the new buyer buys this property, without looking to see if there was in fact a lein on it, responsable for the lein amount?
    thank you so much!

  7. Kirsten Mason on April 13, 2009 at 10:58 pm

    Hi Susan,

    Are you referring to a property under foreclosure or a court ordered sale? These properties are typically listed with a realtor (on MLS) where the title is pulled up and reviewed by the buying party once an offer is received.

    When purchasing any real estate it is important to have your own representation (someone working in your best interest). The best thing to do is consult a lawyer to clarify any questions you may have. I hope that helps! Thanks for your question and have a great day.

  8. Julie on October 1, 2009 at 12:36 pm

    Hi Kirsten,
    good article! I am wondering if it’s legal to contact someone who is in pre-foreclosre and try to offer them solutions before the six months is up.

  9. Kirsten Mason on October 4, 2009 at 10:42 pm

    Hi Julie – You can contact people who are pre-foreclosure. The main thing to watch is how you came by the information and how you approach the home owners. I am sure that people in this difficult position may be at least willing to entertain other options. Good luck

  10. Nicole on October 5, 2009 at 7:20 pm

    Hi Kirsten,

    I am wondering if a First Time Buyer can purchase a Court Ordered Sale with a mortgage. I guess I am asking if we have to have all of the money upfront, or if we can carry a mortgage for the purchase?

  11. Kirsten Mason on October 6, 2009 at 11:52 pm

    Hi Nicole,

    Thank you for your question. When it comes to purchasing a court ordered sale or foreclosed property the initial offer you make on the property can have subjects (such as subject to financing). You will often get approximately 5-7 business days (different with each situation) to get a mortgage approved, home inspection etc. Once those things are in place you remove your subjects. Once the subjects are removed the property then goes before a judge in court. Once in court the judge will ask the court if there is anyone else that wants to make an offer. At this time other people can bring a subject free offer for the property. These offers in court are sealed bids where the judge will open the envelopes and the highest bidder gets the property.

    I hope this helps answer your question.

  12. Jackie on October 18, 2009 at 10:22 am

    I am, unfortunately, one of those people in the foreclosure process and my six months will be up at the end of November. Even though I have gone to court with regards to the Order Nisi, the lawyer for my second mortgage holder who is pushing the foreclosure still has not sent me the paperwork and the courts have not received it either. My business has gone through a slowdown due to the economy so I am unable to make up the back payments and they refuse to tack it onto the mortgage and continue forward like my first mortgage holder did.

    My question is, I know this is inevitable now and I know I can claim bankruptcy for the shortfall, but what I don’t know is when do I physically have to be out of my house?

  13. Kirsten Mason on October 25, 2009 at 7:32 pm

    Hi Jackie – I am sorry to hear about your unfortunate circumstances, you are definitely not alone as many people are in the same position. As far as vacating your home once it goes up for sale under a court ordered sale you don’t have to leave until it is sold. Often homeowners don’t want to live through showings and having buyers come through their home so they will move out before they have to. I hope that helps and all the best with your future endeavors.

  14. Elsa on November 26, 2009 at 2:39 pm

    Hi Kirsten,
    I am in the process of making an offer for a foreclosed property and there will be no subjects at all to be removed. When it goes to court is my offer going to be disclosed for all others to know and then the bidding process begins or my offer is confidential? Do I have to prepare a backup offer at a higher price because all the other bidders will be aware of the starting price, just like an auction?

  15. Kirsten Mason on November 27, 2009 at 8:01 pm

    Hi Elsa,

    Yes, once your initial offer goes unconditional (subject free) it will be common knowledge before going before the courts. Once in court all interested parties (including yourself) will prepare an offer that is a sealed bid. At this point the highest unconditional offer “wins”. If you are serious about purchasing this property you may want to consider preparing an offer for court and have your Realtor accompany you there to help you with this process. You may have to adjust your plan based on what happens in court (number of other bidders). Essentially, yes court is like a sealed bid auction. Hope that helps and all the best with your purchase!

  16. Terra on December 16, 2009 at 4:01 pm

    Hi Kirsten

    Once the offer has been accepted by the bank, how long will it take to get a court date? Also would the listing agent for the foreclosure property know if there will be other bidders appearing at the court?

  17. Kirsten Mason on January 5, 2010 at 3:36 pm

    Hi Terra,

    The court date depends on a number of factors so there is no standard number of days. The listing agent should have an idea whether or not there will be other bidders. Saying that it is always good to come prepared with an offer in the case that there are others there at court. Hope that helps,

    Kirsten

  18. Jackie on January 5, 2010 at 4:35 pm

    Hi, I wrote back in October with regards to when I would need to be out of my house due to the second mortgage holder foreclosing on me. Before the end of November my first mortgage holder foreclosed on me, this I knew was going to happen as I had discussed this with them first, that I wouldn’t be paying them any longer as I was already going through the process with the second. So, the first mortgage holder being the one with first priority did the right thing and started their process. We went to court in December and I have been given six months to sell my home or come up with what is owing. While work has picked up a bit I can’t get financing to cover what is owing so it would still be best if I sold. But now things are going wrong with the house that I can’t afford to fix and are not covered by insurance. The real estate agents where I live are playing games and won’t show it because I had it listed with a 1% agent. Now, of course they are contacting me as that contract is up but then of course they have a higher commission, which would mean I can’t lower my price. I have it listed for just what is owing on it and can’t go below that. Any suggestions on how I can get this house sold?

  19. Elaine on July 13, 2010 at 9:46 am

    Hello Kristen,

    Thank you so much for answering everyone’s question.
    When you answer Elsa’s question, you mentioned that initial offer will be common knowledge before going before the courts. Did you mean on the court day? Can I find it somewhere before the court day.

  20. Kirsten Mason on July 13, 2010 at 1:58 pm

    Hi Elaine, thanks for your question. Once the buyer of the initial offer removes all the subjects that are for the buyers benefit (leaving only the subject to court approval on the offer) the accepted offer then becomes public knowledge. So you can find out what the accepted offer is prior to going to court. Often it is a matter of a phone call to the listing Realtor. Hope that answers your question and have a great day!