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Buying A Foreclosed Property in the U.S.

April 23, 2012

Many Canadians look at the strength of the Canadian dollar coupled with the low price of US real estate and ask if this is the appropriate time to buy properties, such as foreclosed properties in the US. Some potential purchasers intend only to buy a long-coveted vacation home in the US Sun Belt while others wonder if this might be an opportune time to purchase investment properties with the intention of renting them and the expectation of a significant appreciation in the medium term.

The truth is that nobody knows for sure if and when US real estate prices might recover or to what level they may recover.  Will home prices eventually recover to pre-collapse levels or will prices continue to decline? This article neither recommends investing in US properties nor does it attempt to dissuade anyone contemplating such a purchase. Each individual and situation is unique and what may prove to be serendipity to one individual may prove to be disadvantageous to another.  We do, however, advocate that anyone contemplating such a purchase seek professional advice regarding the legal, residential and tax ramifications of purchasing US properties. AG Tax has prepared a number of articles that may assist you to reach your decision. Once again we stress that our intention is to provide information to consider while making your decision depending on your own individual circumstances – we offer no general advice on the appropriateness of such a purchase or investment.  If you wish to make an appointment with one of our international tax specialists we will review your individual situation with your and provide comment on how purchasing a US property might affect you and outline the some of the risks and advantages of such a move. If you have decided to purchase a United States property we recommend that you read our article entitled “Guidelines for Purchasing US properties”.

Seek legal advice

We recommend that anyone seeking to purchase a foreclosed home in the United States seek the advice of a real estate attorney with experience in US foreclosures. If you require assistance in obtaining the services of an attorney you should contact your local bar association for references.

Study the local market before you make a decision

Many individuals and commercial organizations are advertising what they claim to be “once in a lifetime” opportunities in the US foreclosure market. In certain markets home prices are half of what they were at the height of the market. Potential purchasers should carefully study the market trends in the specific market they are interested in and fully acquaint themselves with not just the number of foreclosures presently on the market but also with the number piling up in the courts and the local statistics on delinquent mortgages. Many analysts have speculated that United States banks and mortgage institutions are attempting to manage the incoming supply of current sales in order to prevent further price declines. Mortgage lenders may be managing the number of foreclosures even as delinquencies rise. In the short term this action may tend to stabilize prices by restricting the number of properties that are placed on the market.  The flip side is that the market will continue to see sales of foreclosed properties for a much longer period of time.

A long-term supply of foreclosed properties may provide continued downward pressure on US home prices or at least inhibit significant price increases. Even if the prices of these foreclosed homes appear to be extremely low when compared to the Canadian market it may be a long time before there is any significant appreciation in value. In fact, the Wall Street Journal has recently reported that the home prices continued to decline through the first quarter of 2011 in 27 major US markets. According to the 2011 State of the Nation’s Housing Report by the Harvard University Joint Center for Housing Studies there are at the present time over 2 million delinquent mortgages in the US with another 2.2 million stuck in the foreclosure pipeline. Even if there is not another foreclosure, 4.2 million homes must still be cleared before real estate markets are stabilized. In some US markets the existing inventory of homes for sale is equal to 40 months of home sales. Many analysts predict that there may not be a significant turn-around in the US housing market over the next 3 to 5 years.

In studying foreclosure prices in the selected market in which you are interested you should also study the prices of non-foreclosed property. Just as a rising tide raises all boats distressed pricing affects all home sales. Foreclosures may not be your only opportunity to purchase property at a favorable rate. Many homeowners may have to sell their homes and will have to take whatever price the market dictates. While a bank or mortgage institution may be able to hold a foreclosed property until the market stabilizes or improves a homeowner may be forced to sell in a short period of time. In a market where there are more homes for sale than purchasers, as in the case of most US markets, homeowners can be very motivated and realistic. Their home is worth what they are able to sell it for – no more or no less. Another consideration is that many homeowners have taken the opportunity to move up in their market area. They have purchased another home in the area at a favorable price and are anxious to sell their existing home so that they are able to close.

Make sure that the seller is able to deliver the title

Any potential purchaser of a foreclosed home should be cautious and undertake careful investigation to ensure that the lending institution involved is actually able to deliver clear and unencumbered title to the home you intend to purchase. You are urged to obtain the services of an experienced attorney in real estate foreclosures if you intend to purchase a foreclosed property.


If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.

Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.

We can assist with:

  • Canadian Personal and corporate tax returns
  • Cross Border Taxation and Business Planning
  • Personal and Corporate Taxation
  • Disclosure of Foreign Assets and other information filings
  • Retirement planning
  • Estate Planning, Inheritance tax advice

To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:

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Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.

ABOUTAylett Grant Tax, LLP
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1
With offices across Canada, we are positioned to manage and process the full scope of your Canadian, US and US Canada cross-border tax filing needs.
12752 28th Ave, Surrey, BC, V4A 2P4
104–4220 98 St NW Edmonton AB, T6E 6A1

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