Buying distress property sales in Canada is on the rise, as more and more real estate investors are turning to this form of purchasing to make a profit. This type of investment can often provide a great return on investment and in some cases, a cash flow in the very short term. Many different investors have had the opportunity to purchase a distressed property in Canada and benefit from the transaction.
Distress property sales are motivated by sellers who have inadequate resources to continue to own and maintain a property. Typically, these situations are created by lost of tenants, sudden changes in housing market or other factors.
What distinguishes distressed properties in Canada is that both parties need to engage in a bailout transaction. The current owner, the lender, or both need to benefit in order to make the transaction work. This opportunity often provides discounted prices compared to normal market values. This could be any form of incentive given by the seller which is beneficial to the investor such as shared cash, free rent periods or the ability to extend closing dates.
The seller in a distress sale is attempting to participate in a short sell or foreclosing options comparison in order to unload the exhilarated obligation quickly before further detrimental situations occur. The biggest benefit to the seller is that repossession of the property is unlikely; hence, bankruptcy options are avoided.
There are some important considerations before participating in a distress sale transaction as an investor, such as understanding the local speculative phenomenon, settlement agreements with creditors, past debts, short sale research, and financial strain and development issues with the property. Analyzing and researching the purchase respectfully are necessary in order to gain as much benefit from the transaction as possible.
The history of the distress sale in Canada has not been glorifying. In the past, distress sales targeted vulnerable individuals, such as the elderly, who may not have had the proper legal or real estate facilitators in competition retreat in the process. To reduce ethical issues in distress sales, more stringent legislation is needed in certain areas.
Due to the increase in distressed properties on the market, more and more buyers are also targeting other options such as online auctions, pre-foreclosure sales, and foreclosure auctions for potential investments. These options tend to involve a much larger fees or deposits in order to participate, and generally require that the new owner secure financing before bidding.
In the end, it is important that buyers enrolled in any distress sale transaction approach the purchase with caution. Seeking out legal advice, doing the proper research, and having a clear understanding of any potential pitfalls are all ways to ensure that a buying a distressed property sale won’t result in a costly mistake. When done correctly, purchasing a distress property can be a lucrative investment, but for those entering with only a small understanding may find themselves in over their heads quickly and incur losses.