When facing foreclosure, Canadian homeowners often feel their stress levels spike, especially in situations where they do not know what to expect. A foreclosure is nothing like selling a home. Many feel overwhelmed and uncertain as soon as the late payment notices roll in. Shutting down in response, however, can only serve to make the problem worse, so it is important for homeowners to prepare to handle the situation at hand. They can do by using this guide to learn what to expect when faced with either of the foreclosure types used in Canada.
Types of Foreclosures
A foreclosure in Canada can take one of two routes, both of which are easy to understand and work through. Depending on their location in Canada, homeowners will either go through a judicial sale or power of sale foreclosure.
Judicial Sale Foreclosure
With the judicial sale foreclosure, the process occurs within the court system from beginning to end. Lenders must receive approval from the court to move forward with the finalization of the foreclosure and sale of the property. If the lender wins their case, the courts will award them the right to sell the property by putting it in their name.
This type of foreclosure occurs most often in:
- British Columbia
Along with the need to acquire permission to sell the property in foreclosure, lenders must abide by several rules. They must put the property up for sale at fair market value and only accept bids at that rate and above. This is important as many foreclosures end up sold at auction rather on the open market, making them a prime target for low selling prices.
If the property sells for more than is owed, the surplus must be used to pay off creditors and others with financial interest in the property. The lender can then keep whatever is left of the proceeds. With this arrangement, homeowners are not on the hook if the sales price does not fully cover their debt. As this process can take a long time to complete, and has many restrictions, most lenders prefer to use power of sale instead.
Power of Sale
With power of sale foreclosures, lenders can skip the court proceedings and jump straight into selling the property after payment default. Without having to wait for the court system to move the case through their books, this process takes relatively little time to complete. As a result, power of sale remains the most popular foreclosure option, though there are a few areas that stick with judicial sale foreclosures.
As the property rapidly lands on the market after default, it remains in the homeowner's name until the completion of the sale. Rather than letting it go on auction, homeowners often partner with a real estate agent to maximize its sales price. Since they responsible for any amount owed beyond what the proceeds cover, it is in their best interest to make this investment. They are also able to keep any funds that exceed their debt obligations for the property in question.
Things Homeowners Can Expect During a Foreclosure in Canada
To start either type of foreclosure in Canada, lenders must send out notices and make attempts to help homeowners settle the balance owed. They may offer payment arrangements that can assist homeowners in getting caught up and keeping their home. If homeowners cannot bring their balance current in a predefined amount of time, the foreclosure process will begin.
The judicial sale foreclosure begins with the lender filing a Statement of Claim with the local court system. They will also send out a notice to the homeowners, giving them 20 days to submit a response. Homeowners only have this opportunity to defend their position and ask the courts for leniency. If they do not submit a response, the case proceedings will continue without notification of the homeowner.
Thickwood homeowners who elect to file a defense may end up with a Redemption Order that gives them more time to bring their mortgage balance current. If they cannot, the court will award the property to the lender, giving them the right to sell it at fair market value. Homeowners then have just 30 days to move out and hand over the keys or they could end up in default.
Depending on the foreclosure type used, the property ends up for sale at auction or on the local market to satisfy the debt. The foreclosure type then determines how the responsible parties should handle the remaining balance and proceeds.
With this information, homeowners can brush their worries aside and move through each step of their foreclosure with confidence. They can handle whatever type of foreclosure in Canada that comes their way to achieve the best outcome for their situation.