Buying foreclosure and court order real estate isn’t for everyone; it’s an uncertain, lengthy process with no guarantees of the property’s condition when you get the keys. Sound scary to you? If you’re considering purchasing a home through the courts, read on!
In this article, I’m sharing my experience assisting clients purchasing Metro Vancouver foreclosure and court order real estate in the Vancouver and New Westminster Law Courts. I’m also giving you my tips on preparing for court, what to expect at a hearing and even what to wear to be seen before a judge.
The basics of foreclosure and court order real estate
First, let’s cover some of the basics; foreclosure and court order real estate both go through the same process:
- A legal order for sale is granted
- The property is marketed
- An accepted offer triggers a date in court
- The floor is open to anyone who wants to bid on buying the property at the court date
- A court order is issued to complete the sale
Sounds similar to a typical REALTOR® – MLS® sale, but here are a few significant differences with buying a home in court:
First, in a regular sale, once a firm-accepted offer is in place, the seller can’t back out if a better offer comes in; with a court sale, anyone can outbid the original offer at the hearing.
Second, in a typical sale, if the property wasn’t delivered in good condition as promised, the buyer has legal recourse; in a court sale, the buyer must accept the property “as is” even if damage occurs after the court date before the keys are delivered, there is no recourse.
Third, in a typical sale, buyers are covered by the BC homebuyers protection three-day recession period, but a court sale is final and exempt from buyers’ rights of recession.
Fourth, in a typical sale, the buyer and seller agree to a fixed date for completion and possession(closing and moving day); in a court sale, there is no guaranteed closing date; it’s assigned in court.
And finally, with a court sale, there’s no guarantee the sale will go through; the Judge may not approve the sale at the hearing.
The difference between a foreclosure and a court order sale
Generally, financial hardship will be involved that requires the sale of the property in both cases. But foreclosure is specific to mortgage default. While a court order sale could be for any reason; division of assets at separation/divorce, overdue strata fees, unpaid debt etc.
This is not to be confused with a home being sold due to non-payment of municipal property taxes. In a tax sale, the city can seize and sell the property at auction. But this rarely happens. It would be more common to see property tax paid through a court order. In addition, If a property is sold in court due to other creditors, the municipal taxes must be paid.
The circumstances leading to a foreclosure or court order sale may be different, but the process for both is the same. And they both rely on obtaining a court order.
Where to look for foreclosure and court order homes for sale
Foreclosures and court order sales in BC appear alongside other listings on the MLS® system. It’s not always obvious you’re looking at a court sale. Because court sales hinge on a successful hearing, the representing lawyer must prove adequate marketing. So having the property appear for sale in all the usual places buyers regularly look makes the most sense. You’ll usually see the words foreclosure or court-ordered sale in the listing comment, but it’s not required. You may not easily see it’s a court sale property without further research.
Hearing locations for foreclosure and court order real estate in the Lower Mainland
In Metro Vancouver, two courthouse locations handle foreclosure and court order sale hearings: The Vancouver and New Westminster Law Courts. If the property is located in the Meto Vancouver area, chances are the hearing is at one of these locations. While the hearing could be held at any Supreme Court in BC, the property’s location is considered when choosing the courthouse. All types of housing may be sold as foreclosures and court order sales, including; strata units, condos, townhomes, row homes, houses, duplexes and vacant land.
Viewing foreclosure and court order real estate
If the property isn’t already vacant, viewing foreclosure and court order sale homes can be one of the biggest challenges. It may not be easy to access if the soon-to-be previous owner still lives there. In addition, if a creditor is taking away someone’s home, they’ll probably be upset, whether that’s a tenant facing eviction or an owner losing possession. If the occupants are unhappy, they might deliberately make buyers feel unwelcome or, worse yet, block access.
How to make an offer on foreclosure and court order real estate
There are two ways to make an offer on foreclosure and court order real estate. If you’re the first person making an offer, it’s similar to making an offer on any other home. You’ll submit an offer to be accepted, rejected or countered; you can include subject clauses and do your due diligence. Once you’ve removed your subjects and put down your deposit, a court date will be set. Once the application is made for the court appearance, your accepted price is publicly available along with the hearing request.
This leads us to the second way to make an offer on a foreclosure or court order sale; bidding in court. Anyone can compete in court by submitting an offer at the hearing, and you can increase your offer too. However, at the court date, you can’t include any subjects and must also submit a bank draft for your deposit.
The offers in court are usually collected privately in a sealed paper envelope, or they may be collected digitally and then opened at the hearing. It’s up to the Judge or master if they read the bids out or announce just the winning bid. Whichever way you make your offer, you’ll always have to agree to a schedule A of additional terms and conditions. Many standard terms within the real estate contract will typically be removed or altered. The Judge or master may change any terms of the offers if they see fit. It’s common to have the completion and possession dates assigned at the hearing. This means you may not have a say in the day you’ll get the keys.
Preparing for a foreclosure or court order sale hearing
As a buyer of a court sale property, if you’ve submitted an offer in advance, there’s no requirement to make an in-person appearance. Likewise, at the hearing, you’re not required to be sworn in to make a statement. Still, if there’re any questions or an opportunity to make changes to your offer, it’s best if you’re there. Or if bidding is in the courtroom only and your offer is not the first accepted offer, or you want to increase your initial offer, you’ll need to be there.
When preparing for the hearing, double-check your name is spelled exactly as it appears on your photo ID. Even a slight clerical error in the spelling of your name could stall your purchase. Also, make sure to include your preference for registration (joint tenants or tenants in common). If you’re the winning bidder, the court order is issued exactly as presented in court.
Bring extra paper copies and a blank copy of your offer. It’s hard to predict what will happen in the courtroom, and you might need a backup at the last minute. If you have the first accepted offer, you’ll likely need to plan for a revised bid. Another bidder could turn up unexpectedly, and they’ll have the advantage of already knowing your price. And Lastly, bring at least one piece of government-issued photo ID; you may need to verify your identity.
What to expect at the court hearing
Both Vancouver and New Westminster courthouses open before hearings start in the morning. However, if you’re driving, the underground courthouse parking lots do fill up, so you may need to leave extra time to find parking. Once inside the Law Courts building, find your hearing room numbers on the schedule in the lobby. You’re not supposed to bring food/drinks into the courtrooms, so if you bring coffee, you can finish it in the waiting area; Water is available in the courtrooms.
Hearings are scheduled both mornings and afternoons; everyone booked for the session enters simultaneously and then waits for their case to be called. The Judge or master decides the order to hear cases, which may not be the same as listed in the posted schedule. Even if your case is at the end of the list, be on time because the schedule could be reorganized.
When the courtroom opens, it’s customary to rise when the Judge or maser enters. As soon as court is in session, they’ll jump right into cases, and it happens fast. It goes so quickly; I’ve found it hard to follow sometimes. Various topics are seen each day, not just property sales; you may end up sitting through all sorts of cases while waiting for your case.
The BC courts don’t have an official “legal” dress code for members of the public. There used to be some dress code signs posted around the buildings, but recently, guidelines are sparse. Most attendees come dressed in business casual in the courtroom for foreclosures and court order real estate. The lawyers wear what you’d expect dark suits. The Judge or master may or may not be wearing a traditional robe.
Do you need a lawyer to appear in court to buy a foreclosed or court order sale?
As a buyer of a property sold in court, you don’t need your own lawyer in the courtroom. However, the seller seeking to sell the property by the court’s authority will need their lawyer at the hearing. Once the hearing has concluded, if you are the successful bidder, your purchase will go through a typical closing procedure. Then, you’ll use a lawyer or notary to complete your purchase, just like a non-court-purchased home.
Can the original owner buy back their property in court?
Anyone can submit a bid in court on a foreclosure or court order sale. If the original owner wants to get their home back, they could pay back what’s owed and request the case be dismissed. I’ve witnessed this happen in the courtroom.
As a homeowner, a court order being issued against your property takes a long time. However, nothing prevents an owner from selling the property before it gets to court. So long as you can settle your debts, you may be able to settle out of court. I’ve helped clients avoid court by listing their home for sale and asking their creditors for a reasonable timeline to see the sale through.
It’s rarely anyone’s first choice to go through the court system to collect debt payments. However, if you’re taking steps to make good on your debt, you may be able to settle out of court. Remember that a creditor with the right to force a property sale with a “conduct of sale” only gets what they’re owed. This differs from a creditor who has an “order absolute,” in this case, the creditor can seize the property and keeps any extra money left over after debt settlement. It’s rare to see the order absolute; most foreclosure and court order sales are done under the conduct of sale.
Taking possession of a home purchased in court
Once all the paperwork is signed, sealed and delivered, and you’re the registered owner, you’ll need to take possession. While it’s true many properties sold at court are vacant, there’s a possibility a previous owner or tenant is still occupying the property. This is one of the risks of buying through the court. There are no guarantees, and the property is sold “as is.” As a result, you may need to take steps beyond getting the keys to get possession of your property.
If you’re dealing with evicting tenants or a previous owner, there is a legal process for this. It would be up to you to take the necessary legal actions to get possession. Remember, if something is broken or missing, you can’t go back on the previous owner. At court, you accepted the property “as is, “even if damages occurred before you received the keys.
Closing thoughts on foreclosure and court order real estate in Metro Vancouver
In closing, buying a home through the courts is not for everyone. Often the attraction of purchasing a foreclosure or court order real estate is a perceived saving. Still, ultimately, it’s the court system’s job to sell the property at a fair market price, not necessarily at a discount, to close the case. Winning a bid in court takes careful planning and preparation, and while it can be worth all the extra effort if this lands you the perfect home, you’ll need to carefully weigh up and assess if the risks outweigh the rewards.
