A few tips to help you successfully buy a power-of-sale (the term used in Ontario referring to foreclosed homes):
1. Banks always sell “as is”
The lender has never been in the property and cannot warranty its condition. Usually if an owner can’t pay the mortgage, home maintenance can take a serious hit. It’s very important to have a qualified home inspector and/or specific trades come out to identify problem areas (roof, foundation, HVAC systems).
2. Appliances are not included
Appliances are never included in the sale so don’t bother including them in the agreement. It’s up to the buyer to verify if the hot water tank is a rental and the terms of that rental agreement as well as any other feature or piece of equipment left behind (furnace, alarm system, etc).
3. Negotiating the deal can take longer than normal
The lender is legislated to get market value for the property. Most lenders negotiate rigorously; it’s not uncommon to have a few weeks of negotiations when dealing with a lender. Don’t think you can low-ball the bank and they will accept your offer right away!
4. Owner can redeem the home
If the owner can come up with the funds to clear his default, he has the right to do so until the property changes hands (closing day).
5. Research, Research, Research
Have your lawyer review your agreement of purchase and sale as well as title to the home and know your rights and obligations. Due diligence is important when buying any real estate but even more so when you are buying a distressed listing.