Buying A Court-Ordered Sale
Every so often, you will come across a listing on that is a court-ordered sale (COS). Although specific circumstances differ on each listing, a Court-Ordered Sale usually comes from a situation where a homeowner is unable to uphold their financial obligations to their lender, in which case the lender (through the legal system) is able to sell the home to a buyer pending court approval. If the lender and a buyer reach an agreement for sale, the contract is still subject to approval by the courts, which decide among other things if the purchase price and terms are fair. What many people do not know is that in most cases, competing purchasers can show up to court and offer a higher price for the property, so the sale is essentially open to bids until the court gives its approval. Here are some pros and cons to buying a COS*:
Advantages of a Court-Ordered Sale
The main positive for a COS is that you can usually (but not always) get a good deal on the property. Many times the property for sale is not showing in its best possible condition (as usually there is nobody there to tend to it properly), and unlike normal Sellers, the lender has no real emotional attachment to the property so they are looking to sell and move on. These factors can make the condo a very good deal for buyers.
A Blank Canvas
Another positive for COSs is that since you are getting such a good price on the unit, you can customize it to your exact specifications (which you can pay for out of your mortgage), essentially getting a custom unit for the same price as a non-COS that has been redone to the previous Sellers’ preferences.
Potential drawbacks of a Court-Ordered Sale
The main drawback to purchasing a COS is the fact that you do not know if you have for sure bought the place until the court gives its approval, and there is the possibility that you can be outbid in court. Remember, the better the deal you get on the property, the greater the possibility that somebody else may bid on it as well. Court approval can be several months after the accepted offer, and you may find yourself out funds if you got an inspection on the property and somebody outbids you.
The most common aspect of buying a COS is that you get the property in “as is” condition. Essentially this means that the lender takes absolutely no responsibility for anything that can go wrong in the home, whether it is the general condition of the home, state of the appliances, or the building. They will require you to sign forms stating you accept this. Compare this to a regular purchase, where the Seller is required to disclose any issues with the home and can be held accountable for withholding information.
Another caution is if the previous owner still occupies the home as you are in the process of purchasing it. Although required to leave once you have for sure purchased the condo, they may decide to be difficult and stay past their legal right to occupy the premises. Although it seems like a simple solution (knock on the door and kick them out) it is actually a bit more complex and involves getting a bailiff (at your cost) which can run you up a few thousand dollars. It doesn’t happen often but is a possibility to factor in when deciding to buy a COS. As always, it’s important to talk to both a lawyer and a qualified Condo Expert to make sure your purchase is the right fit for you.
If you are looking to buy a property in the current market, or in the future, it’s important to have an expert real estate agent on your side. Get in touch with The Condo Group Real Estate, reimagined as Island Realm Real Estate, for more information at 250-382-6636.
*This post is meant to be a general overview of COSs, and should not be taken as legal advice.