In previous blog entries I expanded on the term Judicial Sale with examples from our files and my own experiences.
The term Judicial Sale is a court order by a Writ of Execution and presided over by a Sheriff, to satisfy an unpaid debt in an auction environment, known as a Sheriff Sale.
It is generally perceived that properties of this nature are marginal or simply parcels of rural land or lots in cottage country. That is far from our experience.
I am happy to report that a reader of our blog acted on this information recently and became the successful, and profitable bidder, of such a property. She tracked auctions over property tax arrears via the Canada Gazette where notices are posted.
The tax sale property was a regular home in a subdivision near London, Ontario. Auctions have their own rules and regulations. For example, eligible bidders must meet the reserve bid of the court, and appear with certified funds of 20% as deposit. Only the funds of the successful bidder will be retained while deposits of unsuccessful bidders are returned at the end of the auction.
The successful bidder is given 20 days to deliver the balance by certified funds to the court. Failure to do so results in forfeiting the 20% deposit to the court. The property is then offered to the next highest bidder.
Unlike regular purchase transaction, where the purchaser can arrange financing on the property purchased, a Sheriff Sale is an unconditional, cash transaction between the bidder and the court. In the case of our client and successful bidder, we quickly provided private mortgage money from a private investor who registered a private mortgage against her own property.
It is noteworthy that under a Judicial Sale no warranties are given. The successful bidder takes over the property in ‘as is’ condition, including the owner, tenants or other liens or existing mortgages.
For example, our client acquired the unencumbered property, worth about $200,000, with a $30,000 bid. She also assumed the previous owner who occupies the property and is now a tenant. As can be readily seen, the rewards are commensurate with the assumed risks.
It is too early to report on the final outcome but I am inclined to believe that her acquisition will be financially rewarding.
I also believe, that due to the economic climate we live in, occurrences such as the examples of Judicial Sales, will increase. They provide astute investors, who are tired of poor returns and volatility in the stock market, alternative investment opportunities that traditional investment brokerages do not offer their clients.
Arnold Molder
August 24, 2011
