Foreclosures and Grow Ops

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Foreclosures and Grow Ops

We often get clients looking to purchase foreclosures and grow ops because they think they represent significant savings to them versus buying a standard property. Well this may or may not be the case. In this infoletter we discuss both types of properties and the positives and negatives to both.

Many people think that because a property is in foreclosure that it is automatically a “deal”. Well this all depends and often times is not always the case. In most foreclosure situations, the lender that is selling the property is listing the property for or close to market value. Foreclosures are rarely deeply discounted although this does happen sometimes. When buying a foreclosure the first person to write an offer sets the price that they negotiate with the lender. This now becomes the minimum price they will pay for the property and they can’t go lower than this even if there are no other bidders.

Once this first offer is accepted and subjects are removed, a court date is set and this usually happens several weeks down the road. It’s at this time that other buyers may show up in court and present their own hidden bids. You then have to decide whether or not you want to bid more than your original bid. If one or several other buyers are at the court hearing then you will be forced to bid higher in order to have a chance to keep the property that you just negotiated a lower price for. In this case your so called “deal” may no longer turn into a deal if there are many other bidders and the price gets increased. Keep this in mind when bidding on a foreclosure. If the sale price is not a deal in the first place it may end up being too expensive and waste a lot of time at the end of the day!

Grow Ops are a whole other ball of wax. For grow ops that have not been remediated (ie. recertified by the city to occupy) there are basically no lenders that will touch these other than private lenders and in that case you are looking at significantly higher rates (minimum 8 – 10%). In order to even have a chance of getting mortgages at normal rates a property has to be remediated. This means it has been re-certified by the city to occupy and all air and mould tests are satisfactory.

Even in the case of a remediated grow op, none of the big 5 banks will provide mortgage financing on these properties and most other “A” lenders won’t either. We have a few credit unions that will lend on these properties but the number is very limited. Most lenders still won’t touch them even if they are remediated. What does this mean for you? Well this means that if you can get mortgage financing at normal rates this is good for you. While there are very few options we have still managed to get financing for clients purchasing ex-grow ops.

The tricky part comes when you go to sell the property down the road. Given there are so few options for financing, potential buyers for your property may have a hard time getting a mortgage to buy your property. So even though you may have got a mortgage to buy the property you may have a hard time selling down the road with so few lenders available for any potential buyers of your property. Keep this in mind when you are looking at buying a former grow op for the potential of getting a deal.

Rates Variable 5 Year Fixed 3 Year Fixed
2.20%* 2.79%** 2.49%
Rates fluctuate daily and we may be able to obtain better rates than those shown. Please call our office for the most up-to-date Best Rates. *Based on current prime rate of 3.00%. **Rates above are best rates available and may vary depending on quality of the credit application. All mortgages are subject to credit approval.

Important Reminder Regarding Your Mortgage Renewal

If your mortgage is up for renewal and you are being contacted by your lender to early renew before the maturity date please call or email us before signing the renewal. We are able to give you a quick recap of rates in the market to make sure you aren’t signing for a rate/term that isn’t beneficial for you. Often times your lender will tell you that you only have a very limited time to sign the renewal to pressure you into taking the rate they want. Get in touch with us for a quick 2nd opinion!If you require any further information regarding this article or any other mortgage matters please contact our office at 604‐556‐3893. Also, as a reminder to anyone looking for a mortgage, we offer 4 month pre-approvals at no cost to you. This means that you can get a rate hold for up to 4 months to protect yourself in case rates rise.
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About the Author:

Alex Kotai
Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.