Why are Canada's house foreclosures still expensive

SocialClubFantasia said:

Now I understand that Toronto is a fair sized, well populated, and popular city, but why do the prices of houses seem to increase constantly. It has come to the point where even a regular size bungalow in Scarborough is valued over 300,000.

What I mainly don't understand is why foreclosures in Canada aren't as cheap as they are in the U.S.?

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It is because of demand. In the US housing prices are in a downward spiral and US Banks have a large amount of supply to get rid of. In the Canada the opposite is true. Canadian banks have no problem holding off for a price which ensures they recoup all of their original loan value plus costs. If rates rise enough you may start to see some deals on foreclosures as more and more people default.

bankerboy80 said:

It is because of demand. In the US housing prices are in a downward spiral and US Banks have a large amount of supply to get rid of. In the Canada the opposite is true. Canadian banks have no problem holding off for a price which ensures they recoup all of their original loan value plus costs. If rates rise enough you may start to see some deals on foreclosures as more and more people default.

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From my experience, that's correct.

I've been looking at real estate in the USA. The market is a buyer's market right now. Here is a seller's market.

as I understand it, banks here are obligated by law to try and get fair market value for properties. In the US they can just sell it cheap to rid themselves of it.

Tangwhich said:

as I understand it, banks here are obligated by law to try and get fair market value for properties. In the US they can just sell it cheap to rid themselves of it.

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Depends how they get it back...if they sell it under POS (Power of Sale) they have to try to get market value, whatever that is when the POS is a known factor. If they go through the whole foreclosure process they can sell it for whatever they want as the mortgagor is completely out of the picture. The word "foreclose" means just that...the original owner loses all rights, and any subsequent mortgage holder also loses all rights.

As for what either POS's or foreclosure properties sell for...depends on condition, etc etc. just like any other property...and also is affected by the knowledge in the marketplace that this is a foreclosure or POS situation. There are so few of these on the market in Ontario that they would basically sell almost like any other property. But if there are hundreds of them in a city or neighborhood...then value goes down.

The laws in Canada are better suited to protect the creditors, mainly powerful banks...

I bought under POS and Foreclosure. Both are quite different sales in Ontario. With the Foreclosured property, it was a mess. Started out with a $30,000 bid and quickly went up to $450,000 when everyone got paid.

My favourite way to by in Ontario is just through MLS and the odd tax sale is a bargain.

In the US, once the creditor forecloses on a property, it only cares about selling it for enough to cover its exposure.

In Canada, the creditor is obligated to sell the property for a reasonable amount (fair market value) because any residual proceeds remaining after it recovers its exposure reverts to the debtor.