Power Of Sale Myths and Facts

By
Real Estate Sales Representative with RE/MAX Hallmark Realty Group, Brokerage

 

 

 

Under the terms of the Mortgage Act, a property in default can be sold by financial organization using power of sale.

 

A power of sale property is often advertised as a real bargain, but that’s not always the case. While these properties may often be priced at what appears to be lower than market price, there are several myths about how these properties are priced and sold. 

 

The biggest myth is that the financial organization in possession will virtually give away the property to get it off its books. 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. Banks have a responsibility to get fair market value for the property on behalf of the (former) owner. 

 

Financial organizations face potential legal claims from owners if fair market value is not achieved on the sale. The bank usually gets input from a number of sources to arrive at a listing price for the property. An independent third party 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 the comparable sales in the area. The bank compares these reports with other sources of data they may have and chooses a price to list the property. 

 

A key condition of attaining fair market value is to ensure the property gets the widest possible exposure to the market over a reasonable periodof time. This precludes someone selling the property to a favoured customer at a big discount from list price or below market value before it has been listed on MLS. 

 

While it is true that power of sale properties often sell at a discount, there are usually reasons for it. Some power of sale properties have not been maintained and therefore a great deal of work and/or investment may be required. Some may be damaged or have other defects.  Secondly, the bank has very strict conditions of sale and all sales are “as is, where is” and there is very little recourse available to the buyer in the event of problems post-closing. 

 

In the end, it is best to shop these power of sale “bargains” carefully and make sure you have the appropriate professional assistance. 

 

 

If you are considering to purchase please feel free to contact Nancy Benson at nancy@nancybenson.com or at 613.747.4747 to discuss considering Power of Sale properties.

 

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