Are There Really Good Deals in Foreclosures in Canada?

[UTCVenturesLtd]

I seem to be getting in on the foreclosure track although i think that the banks really want close to the market value so there would be not much of spread for an investor to jump in on them to buy and flip.
The preforeclosures on the other hand seems to be the better way to go, saving someone`s credit rating and still having enough spread between the mortgage and the market value to flip for a profit.
Has anyone had some experience in flipping foreclosure property in Canada? Can you find some deals out there?

 

[RedlineBrett]

Depends on a couple of things.

1. Are you in a power of sale province or a judicial sale province. Power of sale (Ontario) is much closer to US law and therefore better deals should be available. I am not experienced in power of sale however so I`ll leave this for someone better versed in this type of foreclosure. For Judicial sale (AB, BC) the law states that the judge can only force a sale if the sale price is deemed to be as close to market value as is possible. Each foreclosure case has to have an appraisal done which is what the judge uses to evaluate this number. So if you come in super low most lawyers (who represent the banks) won`t even bring this contract to a judge because it isn`t close to the forced sale value on the appraisal. Go to the court of queen`s bench and pull a foreclosure file you will learn a lot.

2. What you think a `really good deal` is. 100k under FMV? 20k? Everyone`s bar is different but in my experience anyone with more than 20% equity is going to take another equity loan before giving their property to you... you see and hear adds everywhere and people in this position are going to do their best to stay in their property... even if that means a second mortgage to 100% LTV at 10% or more.

You will find that it will be VERY tough to build a successful business on foreclosures alone. The really good deals just don`t come along often enough to bet your life on this business model. Especially now with 100s of REIN members trying it. If you are looking at it like a hobby for extra cash sure it can be fun but don`t count on it to set you free and keep you free!

QUOTE (UTCVenturesLtd @ Jan 3 2010, 01:00 AM) I seem to be getting in on the foreclosure track although i think that the banks really want close to the market value so there would be not much of spread for an investor to jump in on them to buy and flip.
The preforeclosures on the other hand seems to be the better way to go, saving someone`s credit rating and still having enough spread between the mortgage and the market value to flip for a profit.
Has anyone had some experience in flipping foreclosure property in Canada? Can you find some deals out there?

 

[UTCVenturesLtd]

QUOTE (RedlineBrett @ Jan 3 2010, 05:19 PM) Depends on a couple of things.

1. Are you in a power of sale province or a judicial sale province. Power of sale (Ontario) is much closer to US law and therefore better deals should be available. I am not experienced in power of sale however so I`ll leave this for someone better versed in this type of foreclosure. For Judicial sale (AB, BC) the law states that the judge can only force a sale if the sale price is deemed to be as close to market value as is possible. Each foreclosure case has to have an appraisal done which is what the judge uses to evaluate this number. So if you come in super low most lawyers (who represent the banks) won`t even bring this contract to a judge because it isn`t close to the forced sale value on the appraisal. Go to the court of queen`s bench and pull a foreclosure file you will learn a lot.

2. What you think a `really good deal` is. 100k under FMV? 20k? Everyone`s bar is different but in my experience anyone with more than 20% equity is going to take another equity loan before giving their property to you... you see and hear adds everywhere and people in this position are going to do their best to stay in their property... even if that means a second mortgage to 100% LTV at 10% or more.

You will find that it will be VERY tough to build a successful business on foreclosures alone. The really good deals just don`t come along often enough to bet your life on this business model. Especially now with 100s of REIN members trying it. If you are looking at it like a hobby for extra cash sure it can be fun but don`t count on it to set you free and keep you free!

Hi Brett,

1. I am in Alberta. Guess that will not be anything special then for this province.

2. I had a preforeclosure deal drop on my lap with about $80,000 to $95,000 under FMV! Too bad that i don`t have a team of JV investors to call.

3. There is always a good deal in the stock market everyday! The trick is to find it! That was part of the reason i had enough money to move into a 2nd property and then a 3rd etc... The old advice "Buy low, sell high" works! The other key is to create or follow a "system". That is what the millionaires do!

Thanks,
Dean

 

[RedlineBrett]

QUOTE (UTCVenturesLtd @ Jan 3 2010, 10:25 PM) Hi Brett,

1. I am in Alberta. Guess that will not be anything special then for this province.

2. I had a preforeclosure deal drop on my lap with about $80,000 to $95,000 under FMV! Too bad that i don`t have a team of JV investors to call.

3. There is always a good deal in the stock market everyday! The trick is to find it! That was part of the reason i had enough money to move into a 2nd property and then a 3rd etc... The old advice "Buy low, sell high" works! The other key is to create or follow a "system". That is what the millionaires do!

Thanks,
Dean

Hey Dean,

If you find a deal like that again call me! I`ll JV with you on something like that if it`s in AB.

If you stay dedicated you will definitely make money... just a question of how much and how often that`s all. Sounds like you are making great progress though so keep it up!

 

[michellec]

Hi there,

Yes, I have flipped a foreclosure home in Richmond BC back in January.
We have found the house on a foreclosure list.

The house was that ugly no Realtor would even touch it.
We have given the owners an offer that was to cover the owing on 1st and 2 mortgages as well as other charges they had
on title. At the end of the day we have not made as much money as we thought we would. But we gained a ton of experience.

One of the lessons I have learned is to take into account penalty payments on a mortgage if it is not in foreclosure.
In this specific case there was a 2nd mortgage where the legal action has not started yet.
Few days before closing we have learned that there is a 6 month interest penalty to pay off this mortgage ( $9000 )
We have managed to negotiate the penalty to 2 month interest but had to give away about $300o of our profits otherwise
the owners could not close.

 

[Bill]

QUOTE (UTCVenturesLtd @ Jan 3 2010, 01:00 AM) I seem to be getting in on the foreclosure track although i think that the banks really want close to the market value so there would be not much of spread for an investor to jump in on them to buy and flip.
The preforeclosures on the other hand seems to be the better way to go, saving someone`s credit rating and still having enough spread between the mortgage and the market value to flip for a profit.
Has anyone had some experience in flipping foreclosure property in Canada? Can you find some deals out there?

Hi,

We have completed numerous flips in the Calgary region that were pre-foreclosure situations and they are definitely better opportunities there than in bank or MLS listed foreclosures. By the time it has gone through the entire foreclosure process it is to late to help someone other than the bank (who by their current profit statements may already be ok, recession or not!).

By dealing with the homeowners, prior to foreclosure, there is more likely to be room available for profit which the homeowners may trade for saving their credit, relieving stress and for providing them with a solution.

The issue is of course, where to find these pre-foreclosure properties. There used to be lists you could subscribe to and Wade Fenner`s was the one most of the successful people used, it however is no longer around. There are still ways to access some of the information, but it can be harder, although if it is harder, less people will try it and thus create more possibility for success for the chosen few.

So the answer is yes, there are pre-foreclosures out there, you can make money off of them and they can be a viable strategy. Good luck.

 

[retiredby50]

My brother and I found an interesting situation in the Calgary area lately regarding foreclosures. It`s not so much that the banks won`t take below asking, it`s that they don`t have to.

We`re interested in handyman specials and have gone after three lately. Of the three, one went for 10,000 over list in November, the second went for 8K over list in January, and the third, which even had a condemned basement by the health authority went for about 25K over if I remember correctly.

In all three cases we didn`t see enough of a spread left with what the people paid to make a profit worth the time and effort.

So I concur with the above ideas. If there are great deals to be had in that market, we`re not finding them.Not to say they don`t exist, but I think there are enough people out there looking for them that it may be nudging the prices up.

My two bits
Keith

 

[Bill]

QUOTE (retiredby50 @ Mar 9 2010, 07:56 AM) My brother and I found an interesting situation in the Calgary area lately regarding foreclosures. It`s not so much that the banks won`t take below asking, it`s that they don`t have to.

We`re interested in handyman specials and have gone after three lately. Of the three, one went for 10,000 over list in November, the second went for 8K over list in January, and the third, which even had a condemned basement by the health authority went for about 25K over if I remember correctly.

My two bits
Keith

I expect all of these were via the MLS? By the time it`s hit the MLS its generally too late. The banks don`t have to negotiate, if the property is high ratio, they are insured and get all of their money no matter what happens, if it`s not, there is enough equity that all of their expenses easily get covered and they pass any additional costs onto the homeowners.

To have any opportunity to create the spread required for a proper flip the odds are much better if you can find private sellers.

 

[LeighF]

Is there a way to find out what the bank actually needs to get their money back on a foreclosure property or when it hits MLS they list it for market value, even if the arrears are no where near the list price?

 

[GaryMcGowan]

QUOTE (LeighF @ Mar 11 2010, 08:48 PM) Is there a way to find out what the bank actually needs to get their money back on a foreclosure property or when it hits MLS they list it for market value, even if the arrears are no where near the list price?
They legally have to sell it at FMV.

 

[ashinvestor]

I was wondering if anyone has used canadapreforeclosurelist and if it`s useful?
It seems they charge around $200 per month for providing this list? Please advise if you know
a) These lists are genuine
b) If there are worth the dollors paid..

 

[lilbuffet]

i wonder if there are any reviews out there, because the ppl who sell these so called listes could make more money in real estate using the information, but i guess the same rules apply everywhere, if it sounds too good to be true, it probably is.

 

[WadeFenner]

QUOTE (UTCVenturesLtd @ Jan 3 2010, 02:00 AM) I seem to be getting in on the foreclosure track although i think that the banks really want close to the market value so there would be not much of spread for an investor to jump in on them to buy and flip.
The preforeclosures on the other hand seems to be the better way to go, saving someone`s credit rating and still having enough spread between the mortgage and the market value to flip for a profit.
Has anyone had some experience in flipping foreclosure property in Canada? Can you find some deals out there?


Hello,

For a start I`d like to discuss terminology......

In Alberta there is no such thing as a "Pre-Foreclosure"..... a home owner is either in foreclosure or they`re not. The confusion comes from the difference of having or not having reached the "Judicial Sale" stage of the process. Either way they are in foreclosure.

Once the legal process has started by way of a Statement of Claim having been filed the home owner is in foreclosure plain and simple.


So now the question comes down to two things:

[list type=decimal][*]Buy a list off of a list provider orDeal with realtors on MLS listed foreclosures which have reached the judicial sale stage of the process.[/list type=decimal]
After having been the only list provider in the provice of Alberta for years I quit the business because 80 to 90% of the properties were upside down and I couldn`t in good conscience sell a list to dozens of people when I knew most of the properties didn`t have any equity. The owner couldn`t sell them for a price below the debt so whats the point in paying for the information when the owner can`t sell it anyways. Part of the reason why there are so many foreclosures still, even though the real estate market has improved, is because the owners can`t sell them for less than what they owe..........the bank can and may once it has reached the judicial sale stage but a home owner can`t.

Currently there are more foreclosures listed with realtors than I have ever seen in the 13 years I`ve been in Alberta. Most of them have more debt than equity so the banks will have to lower the price in order to sell them. Recently I have spoken to a lot of investors who have bought fixer-uppers at a price low enough to make a profit (by renovating and reselling them) but don`t expect to get the price so low you can hire contractors to do all the work and still make a killing.

If you`re prepared to get your hands dirty you can make a profit but its a numbers game. Make a lot of offers on a lot of properties and expect to get a lot of "no`s" eventually you may get a deal.

I buy and sell a lot of houses that need work but I don`t intend on selling them to investors who hire contractors to do everything. I know who my target market is and that is the buyer who does the work themself because I won`t drop the price low enough to pay for the additional labour costs from my buyers using contractors. So when you`re buying a MLS listed foreclosure expect the same from the bank. I probably can`t buy many foreclosures from a realtor because I use contractors to renovate.

I still find a lot of junkers to fix or sell but I spend thousands of dollars every month marketing to buy houses....always have and always will.

Just my two cents worth.... hope it helps.

Cheers,

 

[WadeFenner]

QUOTE (Bill @ Mar 9 2010, 12:26 PM) I expect all of these were via the MLS? By the time it`s hit the MLS its generally too late. The banks don`t have to negotiate, if the property is high ratio, they are insured and get all of their money no matter what happens, if it`s not, there is enough equity that all of their expenses easily get covered and they pass any additional costs onto the homeowners.

To have any opportunity to create the spread required for a proper flip the odds are much better if you can find private sellers.


The banks still have to dispose of the property on behalf of CMHC, and its their insurance issue, so no its not too late.

In the past, pre-meltdown, I always said "Get in early" but now the tables have turned and there is more opportunity with MLS listed foreclosures than before the melt-down.

Finding a private seller who is in foreclosure doesn`t help if they owe more than the property is worth which is typically the case. Yes there are foreclosures out there that have equity but that portion of the market has gotten very skinny.

Cheers,