Buying a Power of Sale Property
When a borrower defaults on a home mortgage, the bank/lender has the right to recover its losses by selling the property using the Power of Sale clause contained in the mortgage.
Power of Sale clause grants the creditor or trustee the right and authority, upon default in the payment of debt, to advertise and sell the property through any means at it’s disposal, usually through Toronto MLS Listing Service in Mississauga Toronto or at public auction, without resorting to a court for authorization to do so.
Once the creditor (mortgagee) is paid out of the net proceeds, the property is transferred by deed to the purchaser, and the surplus, if any, is returned to the debtor (original owner). The debtor is thereby completely divested of any interest in the property and has no subsequent right of redemption.
Power of Sale (POS) Caveat emptor
Before pricing such properties bank normally approaches at least 2-3 appraisers. Mortgagee (financial institution) then adds up their margin for negotiation etc. (can be 5-10% or more) to the appraised price and puts the property for sale. Thus, one is not always getting a great deal with such properties.
When you buy a power of sale property, you are buying it “as is”, with no warranties with respect to state of repair of the premises, inclusions of chattels or fixtures, or ownership of fixtures or appliances.
Sometimes disgruntled mortgagors (home owners) purposely harm the property.
The mortgagor (original owner) has right to redeem the property up to the time of waiver or expiration of all rights of termination or fulfilment of all conditions. Putting buyers in the awkward position as their agreement of sale can become null and void. Buyers deposit is refunded without deductions in the above scenario.
One should seek legal advice when approaching power of sale properties, work closely with professionals who represent buyers and not the mortgagee/bank.
If you are looking to buy a power of sale property in Mississauga, let us know. We can also send you power of sale listings. Here is a list of renovations that can maximise your return on investment.