Foreclosure process

A foreclosure or court ordered sale is a fairly common process in British Columbia. This is a process where a property is ordered to be sold by the court for non payment of a loan. The number of foreclosed properties in Kamloops and BC varies based on the market conditions. Often when the market is very active, and it is a Sellers market where prices are increasing we see very few if any foreclosures or court ordered sales. When the market and economy is flat, declining or in recession there are more court ordered sales on the market. 

There are many misconceptions with regards to foreclosures in BC and Canada. Lenders do not want to take the step to foreclosure if they can avoid it as it is a very expensive and lengthy process. Often a lender will not start the process of a foreclosure for two to three months after non payment of the loan. They will send letters demanding payment and if the borrower doesn’t make any arrangements with the lender for payment they are left with few options.  Many people believe the foreclosure process is similar to what they see on TV programs where a home is sold at a fire sale price. This is not the case in Canada. Foreclosures must be listed for market value and there is a process a foreclosed property goes through before the final sale is achieved. Here is a guide to the foreclosure and court ordered sale process in BC. 

1. Loan Payments Stop: This will trigger a letter from the bank or financial institution questioning the nonpayment of the loan. They first check to ensure there is not an error which allows a borrower to remedy the problem if possible. 
2. 2 to 3 months with no loan payment: This is when the lender will start the foreclosure process. The lender will at this time request all arrears for the loan (all interest, mortgage payments and fees). The lender will provide a date that the full payment must be made by. 
3. Demand Letter: This is a letter served to all borrowers on a property The demand letter is the first step in the formal foreclosure process which now involves lawyers and the court system. The demand letter requires the borrowers to pay out the loan in full.  
4. Foreclosure Petition: This is when a formal application is made in writing to the court. Within a few days the borrower is served notice of the petition. This document is also sent to any lienholders on title and tenants residing at the property, not just the registered owners. 
5. Order Nisi: At this time usually about a month after the foreclosure petition is filed there will be a hearing with a judge. The Order Nisi is granted. The judge will also grant the borrowers a redemption period or time to redeem the mortgage. This can be done by paying the loan in full which includes the amount the borrower owes, plus interest, costs associated (such as legal and court costs) and taxes. Commonly the redemption period is 6 months however the lender could request a shorter redemption period. The Lender may also have the property listed for sale at this time or get an Absolute Order of Foreclosure from the court. 
6. Certificate of Pending Litigation: This charge on title is then filed in Land Titles for the property. This document outlines the details of the foreclosure charge and court order. 
7. Order Absolute (Absolute Order of Foreclosure): After the Redemption Period has lapsed and the borrowers have not paid off the loan in full this is the next step in the process. At this time when the order is granted the house then belongs to the lender. The borrowers at this time lose all rights to the property. 
8. Order for Conduct of Sale: This step allows the court to instruct the lender to list the property for sale. This step prevents anyone else from listing the home for sale (such as the owners). It also outlines the real estate commission that can be paid on the property once listed by an agent. 
9. Listed on MLS: The property is now listed for sale with a Realtor. Consumers can usually identify a foreclosure in a listing as the comments have to specify a ‘Schedule A’ to accompany all offers. We can provide a list of current foreclosures and court ordered sales in Kamloops and the Thompson Nicola region. 
10. Offer Received on the property: Once an offer is received on a foreclosure or court ordered sale property in Kamloops there must be a ‘Subject to Court Approval’ clause in the offer. The Buyer will go through all the steps to obtain a final on their financing, inspect the property and investigate any questions or concerns they have about the property. There is a specified subject removal period much like a regular purchase agreement for the Buyer’s conditions, often 10 business days. 
11. Buyer’s Offer Removes Conditions: At this time the Buyer is satisfied with the property and removes all of the Buyer’s conditions. The Subject to Court Approval condition still remains on the contract. At this time the lawyer representing the lender files with the court to approve the sale. 
12. Approval of Sale Order: This is a process that occurs once an offer has been accepted and is subject free triggering this final step. The court is presented with details relating to the property such as: list price, activity levels including open houses hosted, number of showings, any other offers received and the amounts of those offers, etc. The process in court at this time for Buyers of the property is: 
    • The initial offer to purchase is submitted to the Judge or Master prior to the hearing. 
    • Buyers who are interested in the property must appear (or have their Realtor appear on their behalf) to submit their offer. 
    • The offer submitted MUST be subject free and include a copy of the deposit (or certified funds for the deposit).
    • The offer(s) submitted are in a sealed envelope, confidential offer.  
    • The lender’s lawyer will present all envelopes to the Judge or Master for review. 
    • The Judge or Master will confirm verbally that there are no other parties in the court room that wish to submit an offer. 
    • The Master opens and reviews all offers made to the court. The Master then will approve the best offer. This is typically the offer with the highest price. Some Judges or Masters will openly disclose the offers submitted while others will just disclose the ‘winning’ offer which will then be approved. 
13. The Court approves the sale.
14. Certificate of Sale: The Lender then will file a Certificate of Sale with the court that gives all of the details of the sale including disbursement of the sale proceeds.

The foreclosure and court ordered sale process is a lengthy process and it is not as easy as just buying a home from a homeowner. It is sometimes worth going through all of the steps if you are an investor or without a timeline. The trouble is if a Buyer needs a home in a specified amount of time there is no way to guarantee that 1) the court will approve the sale in the timeline the buyer wants or 2) that the buyer will be the successful bid in court. Many Buyers find this process a bit overwhelming and stressful as they are trying to find a home to live in. While investors are a bit more detached and will go through this process in order to find a home that is maybe a better deal since the process is a long and uncertain one. It is worth noting that foreclosed homes don’t necessarily go for a ‘deal’ price. They are listed at market value. I have found that a number of these properties are not in perfect condition and often need some sort of work done. For those looking to put value into a property this could be the right route.

We keep an up to date foreclosure and court ordered sale list. Contact us to get an up to date list for the Kamloops and Thompson Nicola Region.