Ex­pert ad­vice vi­tal for Cana­di­ans in U.S.

Calgary Herald - Calgary Herald New Condos - - Recreation & Investment Properties -

As the Cana­dian dol­lar flirted with par­ity and the U.S. hous­ing bub­ble burst, many Cana­di­ans headed south of the border to pick up a prop­erty bar­gain.

A num­ber of these prop­er­ties had been sub­ject to fore­clo­sure. Ques­tions have been raised re­cently about the con­duct of some fore­clo­sures and a num­ber of banks have halted fore­clo­sures while the trans­ac­tions are in­ves­ti­gated.

“Worst case sce­nario is peo­ple who have al­ready bought a fore­clo­sure,” says David Al­tro of David A. Al­tro and As­so­ci­ates, a mem­ber of the Florida bar and a Que­bec no­tary. “If they are anx­ious that the ti­tle isn’t good, hire a lawyer to do a ti­tle ex­am­i­na­tion to see whether the fore­clo­sure ac­tion was prop­erly done.”

If you are still con­tem­plat­ing the pur­chase, check the ti­tle care­fully.

“Make sure you pay to have the ti­tle checked. Some of these fore­closed prop­er­ties did not have clear ti­tle to be­gin with,” says Carol Bezaire, vice-pres­i­dent, tax and es­tate plan­ning at MacKen­zie Fi­nan­cial in Toronto.

“The house was in the seller’s name, but the ti­tle was held by some­one else.”

Bezaire says some buy­ers are los­ing the pre­vi­ously fore­closed homes they thought they had pur­chased be­cause they do not in fact hold ti­tle for them.

“Any­one con­tem­plat­ing a fore­clo­sure should work with pro­fes­sion­als to guide (you) in ar­eas such as tax, im­mi­gra­tion, f inance and cur­rency ex­change,” says Carla Ray­man, re­al­tor, di­rec­tor of in­ter­na­tional busi­ness devel­op­ment, Pru­den­tial Palms Realty, Sara­sota, Fla.

The large num­ber of fore­closed homes have al­ready had a damp­en­ing ef­fect on house prices.

“The so-called sand states — Florida, Cal­i­for­nia, Ari­zona, Ne­vada — were hit hard­est by the hous­ing bust,” says Sal Gu­atieri, se­nior econ­o­mist, BMO Cap­i­tal Mar­kets in Toronto. “Those are the four states that are at most risk of an­other leg down in the hous­ing mar­ket in house prices.”

A pro­tracted de­lay in the fore­clo­sure process could hit prices again.

“The best would be if these dis­tressed prop­er­ties could be sold off quickly and that over­hang comes off the mar­ket,” says Gu­atieri. “That gives the mar­ket a chance to sta­bi­lize.”

The con­di­tion of the now bankowned prop­erty needs check­ing.

“The bank has never lived in the prop­erty and has no knowl­edge of its con­di­tion,” says Ray­man. “Has the roof leaked, was a per­mit pulled when there was a ma­jor ren­o­va­tion?”

Many Cana­di­ans pay cash us­ing eq­uity from a Cana­dian prop­erty. A fore­clo­sure process can take 18 months but the bank de­mands pay­ment quickly at clo­sure.

“Cash is power in the U.S. mar­ket,” says Alain For­get, a cross border seg­ment di­rec­tor with RBC Bank. “But fore­closed trans­ac­tions are not nec­es­sar­ily the best deal. Be aware of costs that could come up af­ter the trans­ac­tion.”

Tax and es­tate plan­ning ad­vice prior to the pur­chase is key.

“Did the owner pay his Florida real es­tate taxes? Are there any other liens on the prop­erty?” says Ray­man. “That cute lit­tle condo the buyer thinks they ‘stole’ from the bank for $60,000 could end up cost­ing them an­other $80,000 in back (main­te­nance) fees and taxes.”

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