Pay Dirt Series – Buying a Property in Foreclosure

Your borrower found a great deal on a foreclosure property and now they’ve come to you for a mortgage.  There are a couple things to keep in mind.

If the property is priced aggressively, or in a hot real estate market, and you’re in a province where the sale has to be court approved, you may end up in a situation where there are multiple offers in court.  Each court has slightly different processes for this, so you’ll want to be aware of how your local court deals with these.

In a multiple offer situation, your borrower may end up needing to increase their original offer in order to win the bid.  So you do you deal with this?  Find a lender who is familiar with financing these purchasers.  Often the mortgage commitment can be structured to be a flexible amount based on the ultimate selling price of the property.  For example, the commitment may say that the mortgage is approved up to a maximum of $xx, with the loan amount not to exceed xx% LTV.  With this in hand, the borrower can go to court knowing what their bid maximum is, just in case they need to increase their offer.

Ideally, as a broker, your first call should be to your lender of choice for guidance, since not all MIC’s will offer this and if they do, each may have different requirements.