Power of sale homes


Want to buy a house under ‘power-of-sale’?

Every time someone asks me about a ‘bank sale’ or ‘foreclosure’ I know they’ve probably watched a TV program from the US and have different and/or unrealistic expectations on what really happens. Stay with me and get informed!

In a nutshell a lender will exercise power of sale rights when the homeowner defaults on his mortgage.  Generally the owner needs to be in default of the mortgage for a specific time period and proper notice needs to be served before a lender can take possession of the house and start the process to put the house on the market.

The Mortgages Act dictates the process and you can read through it here if you wish to do so.


A few tips to help you successfully buy a power-of-sale:


1.      Lenders always sell “as is”

The lender has never been in the property and cannot speak to its condition.  Keep in mind that usually if an owner can’t pay the mortgage, home maintenance can take a serious hit. It’s so important to have a good home inspector and to have specific trades come out for area specific problem areas (roof, foundation, HVAC systems).  Finding problems and reflecting them in the purchase price is key!

2.      Chattels are not included

It’s up to the buyer to figure out if that hot water tank is a rental, what the deal with the alarm system is and any other feature or piece of equipment left behind.  Furnaces and central air conditioning units can be rented these days so watch out!  Appliances are never included in the sale so don’t bother including them in the agreement.

3.      Negotiating the deal can take longer than you think

You may not know this but the lender is mandated to get market value for the property under The Mortgages Act.  Most lenders negotiate
rigorously; it’s not uncommon to have a few weeks of negotiations when dealing with a lender.  Don’t think you can low-ball the bank and they will accept your first offer!

4.      Owner has right of redemption

If the owner can come up with the money to clear his default, he has the right to do so all the way up to a sale of the property.

5.      Do your research

Have your lawyer review your agreement of purchase and sale.  Know your rights and obligations under the agreement.  The more you know the better prepared you’ll be! Due diligence is key when buying any real estate but even more so when you are buying a power-of-sale.


If you need help, ask a professional!  It’s a good idea to have your own REALTOR® represent you when buying a home.