Power of Sales in Ottawa

As a seasoned Realtor in Ottawa I am often approached by buyers looking for Power of sales in Ottawa AND/OR Bank repossessions - Buyers beware!

In the USA there is such a thing called a "Short Sale". What is this? A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the borrower. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers.  In a short sale, the bank or mortgage lender agrees to discount a loan balance because of an economic or financial hardship on the part of the borrower. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender. (Courtesy of Wikipedia)

Firstly I'd like to point out we are buying and selling real estate in Ottawa, Ontario, CANADA! I feel that many buyers have strong misconceptions about how Power of sales in Ottawa are priced and sold; and that they represent a great bargain. Last week my Broker at Keller Williams Ottawa sent out an email on this topic. Sometimes hearing the facts from a 3rd party (ie: not your Realtor) helps make things a little clearer - below you'll find some excerpt from his email:

"Some people seem to believe that the banks will let a property be sold for either the remaining mortgage amount or if someone wants to assume the existing mortgage. Neither is correct. Remember this is not a foreclosure and foreclosures are extremely rare in Canada.  Mortgagees have a responsibility to get fair market value for the property on behalf of the owner. Financial institutions face potential legal claims from owners, if fair market value is not achieved on the sale."

"The bank usually gets input from a variety of sources to arrive at a listing price for the property.  A third party independent appraisal from a certified appraiser is ordered for a report on estimated market value.  A realtor will also be asked to provide a market evaluation of the property based on a CMA.  The bank compares these reports with other sources of data they may have and chooses a price to list the property."

A few things for you to remember if you're a Buyer bringing an offer on a Power of sale in Ottawa. Many of these properties have not been properly maintained and require alot of work and/or investment of your time and money. Your purchase will be "as is where is" and there is very little recourse available to you as a Buyer if problems arise after closing. You should also be aware that at any time prior to closing the Mortgagee may have the right to recover his property - Buyer beware!

How do you feel about Power of sales in Ottawa? Are they a good investment opportunity or should they be seen as a great big red flag?