Foreclosure is used by a lender when a borrower who has pledged land as security fails to repay the loan.
The owner of a piece of real estate who borrows money through the use of a online real estate residential home loan is said to have an “equitable right to redeem”, meaning that even though he owes money to a creditor who has a charge against the real estate and has breached the mortgage loan contract and as a result lost the legal or contractual right to redeem the property the owner still has the opportunity to redeem the property or home and pay back if he can get the cash.
What this signifies to a lender who’s loan has been defaulted on is that before he can take the asset or otherwise cause it to be sold he must extinguish the borrower’s equitable right to redeem the loan. This is commonly a technicality in that a consumer who has the funds to clear the bank loan through his equitable right of redemption probably wouldn’t find himself in the foreclosure position in the first place.
In BC the online real estate process starts with a petition to the Supreme Court. It is drafted, filed, and served to all respondents. The respondents are the borrower, of course, but also anyone has a claim against the title that has to be extinguished. These can include any guarantors, subsequent brokers, the registered owner of the property (if different from the borrower), a purchaser (if there is an agreement to sell the property in existence) and any Builders’ Lien claimants. The petitioner is the lender who wants to foreclose (or for that matter, a strata corporation that is owed funds).
There are multiple remedies available to a lender. The first move is an agreed upon accounting of all funds owed. The Registrar of the Supreme Court will examine the bank loan contract and the payment history and determine accurately what is in arrears, including how the debt will change as a result of incurring interest as time passes. This produces an amount that both parties have to approve and agree to should reimbursement actually take place.
Next is a judgement against any covenants that the borrower may have assigned the financial institution. The personal covenant survives the sale of the real estate, so even if the borrower has disposed of the property he’s still responsible for the unpaid loan amount. This type of judgement can also be applied to any guarantors or subsequent purchasers (assuming they also provided a covenant to the bank when acquiring the property).
If these steps work the process stops. For instance, if the guarantor pays the lender, or the new buyer clears up the debt, the loan company has been paid and the foreclosure procedure will normally end. If the process does finish at this step it’s obvious that it was never a very seriouspredicament to start with.
For some properties a receiver can be appointed. online real estate with commercial operations or leased properties fall into this category. Mortgage contracts usually have an assignment of rents, and this clause can be invoked.
A lis pendens can also be filed against a property. This stops the real estate from being sold while the loan company sort out their differences.
For a substantial default foreclosure of the borrower’s interest in the property (and, as mentioned, the rights of all other respondents)is the typical course of affairs.
The first thing that occurs is for the loan provider to send a demand letter to the borrower specifying a length of time to pay back the outstanding mortgage loan. Failure to do so ends up in the bank proceeding to the next step, filing the petition with the Supreme Court.
The Court will then issue an Order Nisi which sets the amount of money needed to pay the bank loan and the time frame within which to do so. This time period is called the improvement period. It’s typically six months, but the time can vary.
At this point there are two ways to go. The first involves the petitioner asking the Court to approve a judicial sale. In this case the title of the property doesn’t change, but the property is listed for sale. Generally a realtor will list the property, get offers and present them to the Court.
The Court (in the form of a Master) will review the offers and if they are acceptable (acceptable to the lender and fair to the borrower) will make a court order specifying that the property be sold with a clear title, and with the proceeds satisfying the debt. Any excess will go to the borrower; in the case of a shortfall the lender has more deeply redress against the borrower.
The second way is that of the absolute order of foreclosure. If the redemption period has passed, the value of the property is equal to the loan amount, or more, the borrower is “judgement proof” and the asset can’t be sold (i.e, there is no interest from any buyers), the lender can petition the Court to transfer title free and clear of all encumbrances to the creditor.
An Order Absolute cuts both ways. If it is ordered the financial institution cannot collect against a personal covenant against the borrower unless the order is re-opened. If the mortgage lender sells the real estate asset to a third party he isn’t able to enforce a personal covenant against the borrower because the asset can’t be returned upon payment. If the borrower comes up with the funds to repay the loan the order can be re-opened, and the borrower’s right of equitable redemption is reanimated, but this is only done by the Court, is only done on an equitable basis, and is uncommon.
Any person with any knowledge acquaintance with foreclosures in British Columbia will recognize that the judicial sale course is the most normal one used in foreclosures in British Columbia. Usually referred to as a “court ordered” sale, the court, through its officers (the lawyers) supervises the sale.
After the Order Nisi has been issued, and typically after the redemption period has expired, the lawyer for the creditor will petition for a conduct of sale order. He will then order the online real estate to be listed for sale with a realtor who will advertise the asset. The asset must be competitively priced to preserve the owner’s “equity of redemption”, and the Court will ensure this.
Given that a court ordered sale will be in the form of a court order all offers must be unconditional before they go to court. The Master’s decision will be final, and any successful purchaser who does not abide by it will be defying a court order. The lawyers won’t permit this to happen. As a result all subjects must be removed before a court date is arranged.
One unconditional offer that satisfies the mortgage lender can bring about a court date. At court the lender’s lawyer will present the offer and describe the marketing activities and market response to the property. If the Master is pleased that the marketing has been fair, and that the bid is representative and fair, he will accept it and issue the court order.
If there is a court date you can see multiple offers. The price of the 1st offer will be known, as it is a court document and as a result public knowledge. This will allow other buyers to know exactly what they have to do to beat the first purchaser. Furthermore, the lawyers for some banking institutions will explicitly require that the real estate salesperson disclose the first offer price to all other buyers.
If you find yourself in this situation remember that offers can be adjusted right up to the moment they are presented to the Master. winning regularly hinges on sizing up the competition, making an educated guess of what they are likely to offer, and then adding as little as $200 to the best offer.
If you have not attended a foreclosure before the procedure will go by swiftly. Purchasers often will not even know they’ve succeeded until a person with more experience in court informs them.
Remember, these are rules for BC. Mortgage laws and regulations vary from area to area and country to country.