The second in our series about foreclosures, today's article written by Stan Galbraith of Galbraith Law talks about "the Redemption Period." Part 1 is available here.
Every owner has a ‘right of redemption’. The standard time for a ‘right of redemption’ in Alberta is six months. The owner is given six months after the lawsuit is started to redeem the mortgage or pay any arrears and put it back in good standing.
This redemption period can be shortened if there is little or no equity in the property or if the mortgage has matured.
When the bank’s lawyer goes to court to obtain the order allowing the sale of the property they will also file an appraisal. That appraisal will typically show three values for the property. The first value is the fair market value or the price that an owner can expect to receive on the open market if there is no urgency to sell. The appraisal will then list a forced sale for terms and forced sale for cash value. This is the price an owner can expect to receive if there is urgency to sell and the property must be sold within a certain limited timeframe. Typically the forced sale values are 10% to 15% lower than the fair market value.
If the difference between the amount owing on the mortgage and the forced sale value is positive the court will grant a period of time during which the owner can either sell the property or put the mortgage back in good standing. The court will look at the expected interest that will accrue over the next few months, the costs of the foreclosure and any anticipated real estate commissions to determine whether there is sufficient equity. Where the equity will be eaten up by interest costs in a short time then the court will order an immediate sale.
As an owner, if the appraisal from the bank shows little or no equity you have the option of obtaining your own appraisal that shows a higher price. You can use this to argue for a longer time in which you can sell a house or put the mortgage back in good standing.
If the mortgage has matured then it does not matter how much equity is in the property. The lender is immediately entitled to an order allowing for sale of the property.
About the author: Stan Galbraith is a lawyer with over 25 years of experience. He was admitted to the Alberta Bar in 1983 and has operated his own law office since 1988. Stan has a wealth of experience ranging from litigation and appeal work, to teaching and writing. He has now left the world of litigation behind and works with commercial and residential Realtors and their clients on closing their transactions. He also practices extensively in the areas of small business and wills and estate planning and administration. You can find his website at www.galbraith.ab.ca.
