So, you want to get a deal? Looking at a foreclosed home? Well, the risks in doing that might be more than you expected. Often what looks to be a fantastic deal really might not be exactly that in the end.
Normally, the Seller gives certain warranties to the Buyer that the property will be, amongst other things, in the same condition as when it was originally viewed, that there are no compliance issues, that there are no defects the Seller is aware of. This is not the case in a foreclosed property.
The major issue in dealing with a foreclosed property is that the lender who has foreclosed will be selling the property with no warranties whatsoever. A typical term of an Offer relating to a foreclosed property specifically states that the property is being sold on an “as is” basis.
What does this really mean? In layman’s terms it means that you assume all of the risks with foreclosed properties and may ultimately be left holding a property that has serious deficiencies.
In a standard transaction, the Seller warrants to the buyer that there are no compliance issues and is obligated to provide evidence of that. In a foreclosure situation, you will likely not know of any compliance issue until you go to sell the property in the future and, most importantly, will be left with the problem because the lender sold the property “as is.”
How serious can the problem be? If you purchase a property with a serious compliance issue, say a portion of the garage was encroaching into the neighbouring property, you might not be able to resell that property until that issue is resolved, which could include moving the garage; you have absolutely no recourse as against the owner/lender who sold it to you.
Ultimately, buying a foreclosed property is not for the faint of heart. If you decide to make an offer on one you should ensure that your agent is fully aware of how to protect you and discuss the issue with us prior to making your offer. Sometimes deals really are too good to be true but we can help you get through the process.