This has been a very popular topic of discussion lately and now you too, can understand the process!
A property listed for sale as a foreclosure is sold “ AS IS”. This means that the seller is not responsible for the condition of the house. (no disclosures or warrants provided) The buyer agrees to buy the house in the condition it is in on the day they take possession, NOT the day they viewed it.
The seller (Listing REALTOR®) is responsible for doing their best to get the top dollar possible for the property. This means that when a foreclosure hits the market, it is usually not a steal of a deal and has the possibility of being listed higher then similar, non foreclosed homes. The longer the property sits on the market, the more price reductions occur.
You do not have to offer full asking price. Buyers usually do low ball offers on foreclosures. The bank can than counter your offer and you may counter back and forth until a price is agreed upon.
When a buyer submits a written offer, which includes a Schedule A (this amends certain sections of the regular Contract of Purchase and Sale), to the listing REALTOR®, the listing agent will present that offer to the lender’s lawyer and he or she will act of behalf of the lender during the negotiation. During this period the lender and the purchaser will negotiate a price they are both satisfied with.
Upon accepting the offer, the purchaser will have a limited amount of time to do all their due diligence. The first offer received on a foreclosure may have subjects on the offer (i.e. home inspection, financing approval, etc.) After the buyer is satisfied with their due diligence and they have their financing in order, they then must have a certified deposit cheque or bank draft prepared and remove all subjects in regards to the lender. This is now a subject free offer as far as the buyer and the lender are concerned. However, there is one last subject, which is “Subject to Court Approval”.
The lender’s lawyer will now set a court date and this could take on average 2 to 4 weeks time. At this time, the listing REALTOR® will disclose the price which the offer was accepted for, as this has now become public knowledge. That will give any other prospective purchasers the ability to decide if they want to come to court and outbid the original offer or not. *** Unlike a regular property for sale, the first offer that comes in and is accepted by the lender is not necessarily the person who ultimately ends up owning the property at the end.
At Court the lender’s Lawyer will collect all, if any, competing offers which must be subject free, contained in a sealed envelope, include a schedule A addendum, and be accompanied with a certified deposit cheque or bank draft. (a copy of the deposit is recommended, so you aren’t running around trying to track down the Lawyer after court to get your money back)
When the judge has this property address file in front of her, the judge may give the owner one last time to redeem the owner’s mortgage and any other outstanding debts. If there is no attempt to pay off all the debts they will proceed with the offers to purchase the property.
Should there be multiple offers, whoever has the highest subject free bid in the sealed envelope will most likely be awarded the property. Depending if the property is vacant or owner occupied, the completion and possession dates will be somewhere between 2 to 8 weeks after the court date. (You may also arrive at court with a higher sealed bid as well, in the form of an amendment to the contract, or simply including a new page 1 of the contract, with the new price)
***It is strongly recommended that the purchasers are in court to either up their bid or be present to initial any changes that the judge may request. There are no second chances for anyone after the judge has made their decision and there is no chance to back out of the contract.
The property is now sold and all documentation is forwarded to the parties involved for conveyance.
CONGRATULATIONS, YOU ARE THE PROUD OWNER OF A NEW HOME!