The process of foreclosure on Salt Spring Island in the province of British Columbia;
A mortgage is not a loan. It is an interest in land created by a contract as security for a loan made by a lender to the borrower. In BC a mortgage is both a personal guarantee to repay the debt and a pledge of the property as security for that loan. Borrowers are personally liable for their obligation to pay. One can not just walk away from a home in BC. If a home is worth less than what is owed on it the owner is personally liable. The mortgage company can sue for the difference.
The first thing the lender does is send a demand letter to the borrower which gives the borrower a short amount of time to pay off the mortgage. A demand letter is usually sent out after missing 3 mortgage payments. The seller can sell in this time frame. This is known as a short sale. If they have enough equity they can pay off the lender. If not they will not be able to close the sale.
The next step is a petition is filed in the BC Supreme court. Included in the petition is a request for an order of sale.
Next comes Order Nisi; the lender can apply in the supreme court to an Order Nisi; judgment against a borrower, legal cost and conduct of the sale.
After the Order Nisi is granted the sale can be a “Judicial Sale” or an “Order Absolute of Foreclosure“.
If it is going to be a Judicial sale the lender may choose to have the property listed for sale by the court. The property will be listed with a Real Estate agent. Usually, the property will not be advertised as a foreclosure. Sometimes the owners will be living in the house or it might be rented. Potential buyers will be told by their agents the home is in foreclosure. If buyers want to put in an offer it has to be a subject-free offer with no subject to “home inspection” etc. Usually, the regular contract of purchase and sale is augmented with a “schedule “A” here is an example with an Order Made After Application.
Note to the reader; Mortgages are usually insured and the lender is guaranteed to be covered. Lenders will generally not accept a lowball offer. They will sell at appraised value unless they have special instructions from the insurer they are not going to sell below appraised value. Just because it is a foreclosure do not expect a great deal. IMO sometimes they seem to sell at an over-market price.
The Hearing of the “Application for an order approving sale”. Usually, the listing agent will notify all interested parties of the upcoming court date. This is officially known as “Notice of Application”. For Salt Spring Island all foreclosures are held in Victoria at the Supreme Court on Thursday starting at 10 am. Anyone can ascertain the particulars of the offer before the court by searching the court file the day before the hearing. This will give other buyers a chance to see the first offer. If it looks low they can bring another offer to the hearing. During the hearing, the Master will call for any other offers. Offers are sent up to the Master in sealed envelopes. The offers have to have the Schedule “A” and need to have an accompanying deposit. The Master will not conduct a bidding war. Every party will get one chance to put in one offer. I have been in court with up to 4 offers in my briefcase waiting to see how many other offers are coming in. The Master will generally pick the best offer.
If the house did not sell while listed the lender can go back to court and get an “Order Absolute of Foreclosure”. This gives the lender possession of the property. The lender can make an application for land titles and get registered on the certificate of title. At this point, they can sell the property as if it is their own property.
I hope this helps. We seem to have a lot of foreclosures on Salt Spring and I have become well versed in all aspects of buying and or listing foreclosed properties.
Scott & June Simmons
The Salt Spring Team