Do You Know these 4 Critical Stages in the Foreclosure Process

The more you understand the foreclosure process the better your chances of coming out ahead.

There are many options that you have when you’re in foreclosure and most often selling to an Investor is the best route. Think about it- if an investor is buying your house there must be money in the deal or they wouldn't buy it.

Now, if you’re in serious trouble and have little equity in your house and need out quick- then an Investor may be best option.

These are the steps that take place in a typical foreclosure and I believe to be true. I am not an attorney and do not pretend to be one. This is intended to give you an overview of the foreclosure process in Alberta (specific to foreclosures in Calgary).

Foreclosure Process Defined

Basically a letter outlining that the mortgage is in default and that the borrower to make payments immediately to avoid further actions.

2) The creditor Files a Statement of Claim with the Court of Queens Bench.

The Statement of Claim starts the lawsuit against the borrower. It will usually include such things like;

-the term of the mortgage
-the remaining amortization
-the amount owed
-the amount of money behind
-an order of possession
-foreclosure
-request of shortened redemption period
- As well as other specifics the Lender may request.

3) The next step a Lender will take is called "An Order of Nisi".

An Order of Nisi (also called an Order of Sale) is where the lender is requesting the court to force the sale of the property in order to capture the outstanding money owed.

Think about it from the lenders perspective. If the borrower has not contacted or responded to the lender and there have been 3 or 4 payments missed, the lender has no choice but to try and force the sale of the house.

The Court will grant a specific amount of time called the redemption period to allow the home owner time to bring the payments due.

I understand the redemption period to vary according to the amount of equity in the house. The more equity, the longer the court will allow the home owner to make the back payments.

4) If the home owner is not able to pay the money outstanding the Court can order the sale of the property.

Usually the court will obtain an appraisal to get the value of the house. Then the court will decide how to market the house (usually enlist the help of a Realtor).

The house is then marketed to the public as a foreclosure. Typically the potential buyers are not able to view the property and bids are sealed to be viewed by the court.

After a predetermined amount of time (30-60 days) the bids are reviewed and so long as a reasonable offer is made the house will be sold.

What are Your Options in Foreclosure?

You are able to bring the outstanding payments current through refinancing or some type of short term loan. This amount may be more than just the missed payments- you may be responsible for the lawyer fees and creditor fees such as filing fees.

-Refinance (second mortgage or new first).

If you have owned the house for a while or have significant equity, your ability to refinance the property could be a great choice.

Shane's advice- Do not go out and a get a hard money loan from a creditor at 18% if you do not plan to do something about your house. If the loan is short term solution to your problems then ok.

If the hard money loan is just a stalling tactic- you may end up with less then selling the house yourself.

-Sell Your house (with or without a Realtor).

There are obviously pro's and con's to this, but at the end of the day if you can't afford the house then maybe a quick sale is best.

Depending on the stage of foreclosure and how much equity you have in the house will determine how you sell it.

I won't get into selling tactics too much, but a quick sale will be determined by price and/or the terms you sell.

-You can File bankruptcy

This tactic will stop the foreclosure for a short period of time. I am in the process of learning more about the bankruptcy options here in Alberta and if you would like to comment on this option please feel free to add your comments on the Investing Tips.

-Do Nothing and Walk

As the owner you can do nothing and allow the foreclosure to go all the way. Realistically this can take up to a year. The problem with letting the situation escalate to a forced sale- your credit will be screwed for a long time (up to 7 years).

These are the options I am aware of as they pertain to the foreclosure process. Only you know your situation and what the best solution is.

If you'd like to talk to me about some of the options (I am knowledgeable on refinancing and selling) please feel free to contact me. I won't try to pressure you into anything. My goal is to give you useful information so that you are able to make the decision yourself. Best Regards,

Shane Melanson

918-16 Avenue NW
Calgary, Alberta
T3M 0K3