Kent Locke from Vining Senini was our guest speaker at last week’s RE/MAX sales meeting. Thanks to Kent for giving us this refresher on the process of court-ordered sales and foreclosures.
The judicial process of a foreclosure begins with a demand letter sent to the borrower, which gives the borrower a short amount of time to pay off the mortgage. Once the letter is sent to the borrower, a petition is filed in the BC Supreme Court which requests an action called the Order Nisi that gives a redemption time to the borrower. The redemption period, which is usually six months, is given to the borrower to redeem the mortgage. The borrow may try to sell the property themselves, during this redemption period.
After the Order Nisi, one of two things will happen.
1. The petitioner will chose to have the property listed for sale by the court by way of a Judicial Sale through a REALTOR. At this time, the lender will receive an order, approving the sale. The borrower will be responsible for any shortfall between the borrowed amount of the mortgage and the sale amount.
2. The court orders an Order Absolute foreclosure under the following conditions:
a. The redemption period has expired
b. The property is worth the same amount as the mortgage debt or more.
c. The borrower is judgment-proof (i.e. has no assets or money to apply towards deficiency)
d. There are no offers under a judicial sale.
The lender can seek an Absolute Order under which the lender becomes the new registered owner and all borrowers are wiped off title. No further action can be taken against the borrower after the court has granted the Order Absolute.
Once a judgment is placed against a property it is placed on the market with a REALTOR. At this point a buyer can make an offer on the property.
Here’s what happens next:
1. The buyer makes an offer to purchase the property. This offer includes price and subjects such as inspection and financing.
2.If the offer is accepted and the subject clauses are removed within the specified time, then a court date is set. The buyers subject-free offer goes to court for approval.
3.Once in court the vendor’s lawyer presents the offer to the judge.
The judge asks if there are any other parties in the courtroom who want to submit an offer.
If not, and the offer is market value, the judge will approve the sale.
If there are competing offers the judge will instruct all parties, including the original purchaser to leave the courtroom and resubmit their final subject free offer in a sealed envelope to the vendor’s lawyer.
After all offers have been submitted the judge reviews the offers and approves the best offer. Generally speaking the sale goes to the highest bidder, however, if the bids are close (within $1-2,000 of each other) the judge will sometimes choose to award the sale to the party with the original accepted offer in recognition of their due diligence.