It’s Now An Optional Disclosure By Quebec Realtors
Financial Post revealed that CMHC had been asking Quebec Realtors to keep quiet about whether the home being sold is a foreclosure, disclosure normally considered mandatory. Quebec Federation of Real Estate Boards which oversees 12 real estate boards in the province, eventually agreed the Crown corporation reached a compromise with the Quebec Realtors to leaves it up to the real estate professional to decide whether to put that fact on the MLS system for buyers, including investors, to see.
Why the new ruling?
The CMHC stance has industry experts divided, with some wondering whether the corporation is hoping to dodge low-ball offers by avoiding disclosure, or preparing for a housing market collapse.
For investors and buyers, not knowing a deal is a foreclosure can make the difference between offering market price or going in with a low offer many buyer for a distressed property. When CMHC takes over the responsibility of recovering money loaned to a home owner who defaulted on his or her loan is determined by the financial institution that issued the loan and CMHC.
How most banks deal with their foreclosed properties now?
When a bank takes over a loan in default through a power of sale or foreclosure, the process is very formal and a process is in place how the property is disposed. First, three appraisals or evaluations are done to establish the value of the property. The property is listed on the mls system indicating the bank as the owner of the property. When an offer is submitted which falls within 5% of that value, a date is booked to deal with the sale through the court. If no offer is forth coming after a period of time the bank might drop the list price by 5% and then wait for an offer within 5% of the new list price.
Any low ball offers below the 5% listing price will not trigger an acceptance by the bank. This process safeguards the sale and disposal of the foreclosed property below the price expectation of the bank. An investor or home buyer can submit a low ball offer, but they will be just wasting their time and energy.
Loaming danger faced by CMHC
In today’s market when home prices are down by 10% or more, CMHC has on it’s book many properties that are worth less than their loan values. CMHC is in danger of holding thousands of properties and tens of millions in potential losses if home owners default on their loans. CMHC’s concern is on too many foreclosed properties undermining the value of all the other properties which they are guaranteeing under their insurance program.