Power (of Sale) Struggle

On this fine morning I thought I would address some misconceptions that exist with power of sale properties.  Now I am aware that most Active Rain members are in the US and that there are differences in the legal procedures between there and here in Canada, particularly Ontario.

What does "power of sale" mean?. Specifically, "power of sale" addresses a clause in a mortgage contract, or statutory power, giving the mortgagee/lender the right and power on default of the debt, to advertise and sell the mortgaged property to satisfy;

• the principal (loan amount) due under the mortgage;
• interest costs due under the mortgage;
• the payment of expenses incurred under a sale or attempted sale, and
• the payment of susbsequent encumbrances (mortgages registered) according to their priority.

Power of sale does not mean bargain priced... particularly in today's day and age of low equity financing. While the procedures and mortgage insurance premiums have allowed people with little down payment to join the ranks of homeowners, it has also created a balancing act that can be easily disrupted.

I recently listed an income property that was being sold under power of sale.  The lender had followed the required procedures and timelines and the redemption period had expired.  The property needed work and had been mismanaged by the Mortgagor. While there was interest in the property and it certainly had a great deal of potential - the lack of real equity in the property did not result in any successful offers.  For months the Mortgagor asked for payout statements promising a payout.  As a Realtor, I always price my listings to sell - I don't blow smoke. It's either worth it or not. The Mortgagor was trying to get in the middle with tenants and interfere with the marketing of the property. 

The end result? I advertised the property for months, showed it, and in the end... The Mortgagor payed out the lender and I'm moving on to the next one and not holding my breath to recover my real costs.  The lesson? Business is business, but be aware.