WHAT YOU SHOULD KNOW BEFORE BUYING
Over the course of my 28+ years as a real estate agent, I have been on the listing/selling side, and representing buyers who wish to purchase a home listed under Power of Sale. I sold a property in STREETSVILLE a couple of years ago which was under Power of Sale and I had many clients and perspective buyers asking me about Power of Sale properties because they think they can “get a good deal” and potentially purchase the property at less than market value.
This is a misconception many people have as this is not the case. The Bank or Financial Institution selling the home must sell the property at fair market value or risk being sued by the previous owner for selling at a lower amount. The Bank must get at least the outstanding amount owing on the property, plus sufficient funds to pay the commission, and any surplus is paid back to the owner.
Once the Bank has taken possession of the property, after default by the owner, the Bank takes full control of the property and usually lists with a Realtor on MLS to get the property sold. They typically require all offers to be faxed, and ask for 48-72 hours for irrevocable time, and only review/accept offers during business hours.
There also some pitfalls associated with buying a power of sale property.
- there are no warranties associated with the property, or its condition
- the property is usually sold in “as is” condition
- there are no warranties associated with any appliances, if any are left behind
- there are no warranties of ownership of any chattels on the property
- there are no warranties of any contaminants or hazardous material that may be present
- Typically, the lender does not allow for any inspection conditions in the offer… If you want an inspection you must conduct that prior to submitting an offer and depending on the findings, decide if you want to proceed.
- The previous owner has up to the 11th hour, even if a firm offer has been accepted, to bring his mortgage payments current and re-claim his property.
- The Bank usually includes many schedules and it would be prudent to have your lawyer review these prior to signing.
Therefore, getting a “good deal” isn’t always the case with Power of Sale properties, as there is some risk level associated with these properties, and you could end up having your contract negated if the owner brings his mortgage payments up to date before the property changes ownership.
You should ensure you get all the information associated with Power of Sales purchases from your real estate agent or lawyer relative to the laws in your area before signing on the dotted line!
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