The British Columbia Real Estate Foreclosure Process

February 17, 2009 in Kamloops Foreclosure Info by Kirsten Mason | 46 comments

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

foreclosure home for sale 300x199 The British Columbia Real Estate Foreclosure ProcessThe 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!

  21. Tammy on October 21, 2010 at 8:13 pm

    Thank you for all the comments. We are in the process of buying a forclosed home. We go to court on Monday, it was helpful to know that the bids will be sealed if there is other offers. We are a little intimidated by the process we dont want to lose out but on the other hand we dont want to over bid. The realator said there will be another offer can she tell us?
    any suggestions ?

  22. Kirsten Mason on October 21, 2010 at 11:34 pm

    Hi Tammy – there is really no way for sure to know what the offers are and how many. Once you get to court anything can happen, there could be no other bidders or numerous bidders. If your Realtor is aware of another offer then he/she should be able to tell you about it’s existence but your Realtor won’t know what the offer actually is. The only thing you can do is put your best offer forward and hope for the best. There are no guarantees when it is a sealed bid as you don’t know what other bidders are offering. All the best in court on Monday!

  23. Kurt on November 7, 2010 at 3:37 pm

    Is it benneficial to be the first person to submit the offer or just show up at court? I need to have financing approved as I am still in my current home. I have been told by the banks it should not be a problem to get equity out of my existing home but as the property was former grow op the bank has suggested that they may want an appraisal before signing off on anything…..by these stmts I suspect making that initial offer may be best just to buy some time with an appraiser and home inspection……??

  24. Kirsten Mason on November 9, 2010 at 9:10 am

    Hi Kurt – Due to the fact that this home was a former grow op I would suggest you give your financial institution ample time to approve financing. It is often more difficult to get financing on a grow op. You need to go through the formal pre-approval process to ensure that they will without a doubt give you financing. You need to either write an offer on the property or give the bank the MLS information with the max price you want to pay for the property in order to get an approval. Saying that banks typically want to see an actual signed contract. Since you are pulling equity out of your own home that is one other step the bank has to take so the more time the better. I wouldn’t rely on them telling you loosely that you wouldn’t have a problem with financing as they are not promising anything and if they change their mind there is no one to hold liable. There is no benefit really to be the first to write an offer other than the time you get to clear all your subjects. In this situation you may have benefits due to your specific situation. So go for it! You just have to recognize you may spend a lot of time and money preparing for this purchase only to have another person come to court and pay more for the property in the end. All the best and I hope this helps.

    Kirsten

  25. Holly on January 8, 2011 at 7:15 pm

    We are looking at a foreclosured property only because we liked it 3 years ago and now it is on the market again. How does one go in with “no subjects”….we are told you always should include “subject to financing” ..even if you have been told that it will be in place…we are only able to get a “rate” approval. How do people get around that? Do we need to get something in writing to that affect from the mortgage broker to ensure that if we are awarded the property that they will commit to their committment to give us a mortgage for that foreclosured property.

  26. Kirsten Mason on January 8, 2011 at 8:44 pm

    Hi Holly, that is good that you have gotten a pre-approval for a mortgage. Is there currently an accepted offer on the property or is it still open to offers? If the property does not have an accepted offer you can make an offer, in this offer you can have the subject to financing and other standard subjects. You will also have to have a subject to court approval clause in there as well. If this is the case you can go through getting your home inspection and getting the financing approved through your mortgage broker.

    If the property already has an accepted offer on it and you are waiting to go to court you will have to have a contract to purchase drawn up for the mortgage lender to approve so that you know the money is going to be available if and when it is needed.

    Since this process is complicated I would suggest you get a Realtor to help you with the paperwork and guide you through the process. You will also have a representative working for you once it does go to court. You don’t have to pay a Realtor to help you with this as you are buying and commissions are covered by the selling party.

    I hope this helps!

  27. RB on January 25, 2011 at 10:57 pm

    Thanks for all your answers on this page, it has been very valuable. I have recently put an offer on a foreclosure property and am expecting a court date within the next couple of weeks.

    My question is, in the event that other bidders show up in court, and their highest bid matches my highest bid, do I get the priority? (because of being the first offer?)

    I appreciate any insight!

  28. Kirsten Mason on February 6, 2011 at 9:55 pm

    Hi RB – the chances of another offer being 100% identical to yours is slim to none as there are a number of factors that are taken into account (i.e. possession dates, deposit, etc). If for some reason they are exactly the same they could either ask you both to re-write them or accept yours as the first. There is not a concrete rule on this one especially since it doesn’t really happen. Your initial accepted offer is open to the public so unless you change your offer for court any other buyer would be silly to prepare an identical offer to the accepted offer.

    I hope that helps! Good luck.

    Kirsten

  29. John on March 16, 2011 at 10:38 pm

    Thanks very much for all the thoughtful instruction in this thread. It is really useful.

    I have a question, in the event that no bid is made. My understanding is that in the particular property I am interested in, the property will revert to CMHC, and in that case a court approval is unnecessary and CMHC can accept the first bid they deem acceptable — even if it is only $1.

    My particular question: how long must a property be listed on the MLS before CMHC will assume the property, thus avoiding the whole court/sealed bid process?

    Thanks again. This is very helpful.

  30. Kirsten Mason on March 18, 2011 at 7:08 pm

    Hi John,

    Thanks for your question. Yes typically the banks will try and sell the property to cover their debts. If they cannot do this it ends up going to CMHC if CMHC is the insurer of the mortgage. From what I can tell there is no specific time frame for the banks to sell before it goes to the insurer.

    CMHC sales are much more simple and straight forward. You don’t have to deal with the court process or sealed bids. From my experience with these sales my clients have gotten great properties with few complications.

    Sorry I can’t provide a time frame but there isn’t a simple answer. Have a great day,

    Kirsten

  31. JC Norton on April 5, 2011 at 5:47 am

    A couple of other questions come to mind. Does the initial offer have to be at the fair market value of the property or can the offer be much lower? For instance if the property is listed for 500K can you submit an offer of 200K and will the court proceedings commence at that point?
    Also is the any way to find out what the bank has owing on the property, or is that largely irrelevant as most are CMHC insured?

  32. Kirsten Mason on April 26, 2011 at 9:03 pm

    Hi JC,

    The initial offer can be whatever you want it to be, that doesn’t mean that the bank will accept it. You need the bank to accept the offer in order for it to go forward to the next stage. I think a lot of Canadians get the US foreclosure process confused with the way it is done in Canada. An offer of $200k on $500k would more than likely be ignored as that is a ridiculous spread in price.

    As far as I know there is not a way to know what is owed. Saying that yes they are insured by either CMHC or Genworth so the banks have back up in the case that they can’t cover what is owing on the loan. Hope that helps!

    Kirsten

  33. Rob on November 17, 2011 at 6:59 am

    Hi Kirsten,
    I made an offer on a court ordered sale, why do other potential buyers wait for someone else to trigger the court date?

    Cheers,

    Rob

  34. eve on November 27, 2011 at 6:40 am

    In a foreclosure I understand that the offer must be subject free–my question, the property we are looking at goes to court in one day, we have no time to have a lawyer look at the title and no time for an inspection of the condo. The agent has told me that the title is free and clear, is this the case once the courts take over? Do they take care of liens against the property and make sure that you are getting the title free and clear? What would you suggest in my case. Thank you

  35. Kirsten Mason on November 27, 2011 at 10:04 am

    Hi there,

    It sounds like in this instance you really don’t have a whole lot of time to investigate the property thoroughly. Have you had a chance to review the strata minutes, Form B and financials? That is pretty important to do when buying into a strata as you will know what is going on in the strata (in terms of special assessments, potential issues, contingency fund issues, etc). If the contract to purchase is written properly you would be taking the title free and clear of any financial charges, so I would just ensure that your purchase contract outlines that. You should make sure you have your own representation in the way of an experienced Realtor working for you. I guess that is all I would suggest other than an inspection would be important so you know what you are buying as you again are taking on some risk not inspecting the property. I am sure this won’t be the last condo that you are interested in so if you feel too rushed wait for the next opportunity. Hope that helps!

    Kirsten

  36. Gerry on December 26, 2011 at 8:06 am

    Thanks for your excellent service and information.
    Could you tell me if a realtor is obliged legally to say in advertising if the property is “Court ordered” or a foreclosure? I have my eye on a house that I think it a foreclosure, but none of the advertising says so.
    Thanks,
    Gerry

  37. Kirsten Mason on January 4, 2012 at 10:58 pm

    Hi Gerry – I don’t believe that the listing Realtor has to put in the description ‘court ordered sale’ or ‘foreclosure’ by law but it is strange if they don’t disclose this. You can always contact your Realtor who can find out who the seller is and if it is a bank/financial institution it is probably a court ordered sale. Your Realtor can also contact the listing Realtor to get the details. Hope that helps! Kirsten

  38. Kirsten Mason on January 4, 2012 at 11:04 pm

    Hi Rob – Buyers often wait for someone else to trigger the court date for a few reasons. First, they may be waiting for the initial buyer to do a home inspection (and pay for one of course). Second, they may want other buyers to do all the work in terms of negotiating. It is pretty easy and quick to show up in court on the court date as opposed to going through weeks of inspections and formalities. Finally, some believe they will get a better deal if they wait until court. It really doesn’t matter if you are the first or the last offer, it all comes down to dollars in the end and who will pay the most. Every buyer has their own personal reasons and sometime the reason for this doesn’t make sense. Hope this helps. Kirsten

  39. Derrick on January 5, 2012 at 7:04 am

    I declared bankruptcy in August and just received cetificate of pending litigation from my mortgage holder. My redemtion period is only one month. I currently owe 160,000 on my house and the current market value is $130,000.00 My question is do I have to move out in one month or are they going to put my house up for sale and I will be here until it sells. I have had it for sale for the past year and a half with not one showing. How much notice will I get that I have to move out?

  40. Kirsten Mason on January 5, 2012 at 9:18 am

    Hi Derrick, They definitely will be putting your home up for sale and usually the owner is required to move out once that happens. There are instances where the owners live in the home while it is being sold, that is something you would have to work out with your mortgage holder. You may want to talk to your lawyer for legal advice in this instance as I am not sure what your rights are as an owner in this instance. Sorry I can’t be of more help. All the best to you. Kirsten

  41. Teresa on January 14, 2012 at 2:23 am

    Hi Kirsten, Thanks for your insights. I’m interested in buying a foreclosure property. I got the pre approved mortgage pending satisfactory appraisal from the bank. The bank will need to charge me $200 for the appraisal if I ended up getting the property or not. My offer has to be subject free except one “subject to court approval”. Should I go ahead and order the appraisal knowing that I may not get the property at the end and wasted $200? or should I wait till the court date and do the bidding? I don’t think the appraisal would be a problem, it’s a fairly new building and I actually know the tenant in the property and have seen it privately. My second question is that I don’t have a Realtor, the selling Realtor is willing to represent me. Is it to my disadvantage to have the selling Realtor represent me? Thanks.

  42. Kirsten Mason on January 17, 2012 at 8:16 pm

    Hi Teresa – so what if you are the successful bidder in court, they take your offer, get the appraisal and the bank won’t give you the mortgage? I think that the order you are doing this is not quite right. You should not have removed your subject to financing clause unless the appraisal came back and was accepted by the bank. I have seen a number of appraisals come back lower than home buyers have expected and they have not been able to secure financing due to that appraisal. You really should get a Realtor to represent you so that you are advised appropriately. If you do go to court, they accept your offer, you then get an appraisal, then the bank is unhappy with the appraisal ~ you will be in deep legal trouble as you have contracted to purchase the home. So definitely get someone to help you with this process as I am not sure that you are watching out for your own best interests. I hope this helps and if you need help finding a Realtor in your area I would be happy to direct you. Have a great day. Kirsten

  43. Teresa on January 18, 2012 at 8:09 pm

    Hi Kirsten again, thanks for your advice. I should have made myself clear in the last message. My intention is not to order the appraisal until I find out the accepted offer’s amount, then I will decide if I want to even get into the bidding process. I understand that once the accepted offer becomes public information, it takes around two to three weeks to the actual court date. I then will have two to three weeks to get an appraisal.

  44. Kirsten Mason on January 20, 2012 at 8:03 pm

    Hi Teresa – ok good, I was a little concerned :) . It sounds like you have a good handle on things. You will definitely have time once that offer becomes public. All the best to you.

  45. Kate on January 30, 2012 at 5:23 pm

    Hi Kirsten,
    I’ve been looking into a condo on foreclosure, but was wondering if someone else was to put an offer in on it first and it went to court how would I know that an offer has gone through and when the court date is?

  46. Kirsten Mason on January 31, 2012 at 5:38 pm

    Hi Kate – you should probably get a Realtor to help you with this so that they can keep tab on the property. Alternatively, you can call the listing Realtor and ask to be contacted when there is an offer or court date set. Saying that, the listing Realtor could forget to call you as they are not working for you and you could miss out on the property. The best option is get someone to keep an eye on that property for you, especially since a buyer’s agent doesn’t cost you anything for their services. Hope this helps.