Expert advice vital for Canadians in U.S.
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.”