Kelowna Foreclosures

We’ve all heard of foreclosure sales and I bet most of us have been at least a little tempted to try and pick up a good deal on a piece of distressed property. However, most do not pursue these great opportunities and I find it is largely because of a lack of understanding of the foreclosure process. At the beginning of 2017 there were 134 active foreclosures in the Kelowna area. Approximately 77 of these were single-family homes and the average price was around $300,000. In the last quarter of the previous year, foreclosed properties were selling on average within 5% of the listed price.

BC's foreclosure rate increased from 0.11 in Q1 2023 to .16 Q3 2024.

Learn the Foreclosure Sale Process in Kelowna

What Is a Foreclosure Property?

To start, we should clarify what qualifies a foreclosure property. A foreclosure is a property that currently belongs to the bank. The original owner could no longer make the necessary payments, and the bank was then granted ownership of the home, condo, or land. The bank has no interest in holding onto the property, so they'll quickly enlist the services of a REALTOR® to sell it. Once listed, buyers can place an offer on the property.  

Why Do Sellers Go Into Foreclosure? 

A seller can cease from making their payments for any number of reasons, but some of the more likely scenarios include: 

• a job loss or inability to work due to an injury
• excessive debt
• divorce

In many cases, the property is still in good condition, it's just that the homeowner can no longer make their monthly payments. It's an unfortunate situation for them, but a great opportunity for you as an investor!

How To Buy a Foreclosure 

If you're looking to buy a foreclosure, the biggest suggestion we can offer is to act quickly.

If you are the first to make an offer on a foreclosure, you will be required to pay your deposit into a trust where it can be held for up to 3 weeks while waiting for the court session. Subsequent bidders don’t need to pull out their checkbooks until the actual court date. As a result, many incorrectly think it is best to wait and bid on the court date.

Making the first offer puts you in the driver seat and here are the two main reasons why

1. Making the first offer gives you the ability to negotiate the bottom line. When you show up after the 1st party their realtor has already negotiated an accepted offer, at this point the price cant go down it can only go up. Being first allows you to feel confident the accepted price was the absolute lowest it could be.

2. This is the big one and it pertains to time, which is not always on our side. When a foreclosure property with good potential comes on the market it is relatively unknown at first.

The longer the property is owned by the bank, the more interest it can garner, which increases the likelihood of multiple offers in court. The hypothetical scenario below will better paint my picture.

A foreclosure property comes on the market where over a 3 month period it is shown 26 times. You decide to put in an offer. You negotiate a terrific deal and the court date is set for two Wednesdays from now. In the meantime, the listing agent is contacting all 26 agents who also showed the property telling them about the great deal this has become thanks to your savvy negotiating. It's his job as the listing agent to increase competition for the listing, but you now run the risk of a handful of these other agents or investors showing up to court to outbid you. By acting quickly, you minimize the number of agents and their investors who see the property, thus reducing the number of contacts the listing agent could make by waiting. As a result, your bid often shows up in court unchallenged.

How Is Buying a Foreclosure Home Different Than a Traditional Transaction? 

Your first step in buying a foreclosure is similar to a traditional purchase. You still make an offer with your standard conditions, including financing, inspection, and all other due diligence clauses. This is very important as the bank will then have you sign a document called a "Schedule A" which serves as a giant disclaimer and puts 100% of the bonus on the buyer. This is true "buyer beware". After the due diligence period, you then remove or waive your conditions and place a small deposit in trust, usually in the amount of $5,000. Once the Vendor’s lawyer receives your firm bid, they request a court date. Typically, a court date will be approximately 10-14 days after you remove conditions. In Kelowna, the majority of foreclosure properties go to court for approval on Wednesdays at 10am.

3 Things to Expect During the Actual Foreclosure Court Session

1. Once in court the vendor's lawyer will present the offer to the judge. (Known as the Master in Foreclosure proceedings)

2. The Master asks if there are any other parties in the courtroom who want to submit an offer. If not, 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.

3. After all offers have been submitted the Master reviews the offers and approves the best offer. Any competing bids at court must be subject free. As you can see the foreclosure process isn't nearly as ominous as it's reputation makes it out to be.

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