FAQs - Durham Power Of Sale

FAQs

General FAQs

What is a Power of Sale Property?

In Ontario when a borrower defaults on a home mortgage, the bank/lender most often attempts to recover its losses by selling the property using the Power of Sale clause contained in the mortgage. Due to legal fees, foregone interest and other property expenses, the estimated losses to the bank for Power of Sale properties can range from 10 percent to 30 percent of the outstanding loan balances. There are other variables that can affect the losses or costs when a property is sold via power of sale such as the deterioration of the property and the time it takes to process the paperwork.

Definition of Power of Sale: A clause commonly inserted in a mortgage and deed of trust that grants the creditor or trustee the right and authority, upon default in the payment of the debt, to advertise and sell the property through any means at it’s disposal, usually MLS in Ontario or at public auction, without resorting to a court for authorization to do so.

Once the creditor is paid out of the net proceeds, the property is transferred by deed to the purchaser, and the surplus, if any, is returned to the debtor. The debtor is thereby completely divested of any interest in the property and has no subsequent right of redemption (recovery of property by paying the mortgage debt in full).

Power of Sale Maintenance Fees and Property Taxes shown on the MLS listing as ZERO $, how can this be?

Another question about Power of Sale properties is if the maintenance fee of $0 per month is correct as shown on the MLS listing. Same with the property taxes, often the amount shown for the property taxes on the listing for a POS property is often $0

It's not a misprint, it's done on purpose by the listing agent and/or the bank who is selling the property. Many banks want the agents to put zero for maintenance fees and taxes on the listings.

The reason is so the bank is not responsible for any amount that may have been stated on the mls listing. If the bank showed $400 per month and it ended up being $450 per month, normally a purchaser could go after the bank/seller for the difference. If it's shown as zero dollars and in the fine print of the offer, it states that the purchaser must investigate and satisfy themselves of the monthly maintenance and taxes, so the bank is off the hook in showing the correct amount.

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