What needs to be considered when buying a power-of-sale home?


When a home is being sold by power of sale it means the mortgage lender, not the homeowner, is selling the property. It’s a remedy available to a lender when the homeowner defaults on their mortgage.

As a buyer, there are some important things to consider about power of sale transactions.

Don’t expect to get a discount just because the emotional attachment of the homeowner is removed from the equation. The lender is obligated by law to get market value for the property. Speaking of emotion, don’t fall in love with the refrigerator or any other appliance. They won’t be included in the sale if the lender doesn’t have ownership of those appliances.

Be aware that the lender will not give any warranties about the condition of the property. That means it will be sold in “as is” condition; a homeowner in the process of losing their home may not be able or motivated to keep up good home maintenance or repair. As with any property, the best way to protect yourself is to make sure any offer you submit is conditional on your satisfaction with a home inspection.

You should know the lender may include a clause that gives the owner a “right of redemption,” meaning the sale can be called off if the owner brings the mortgage back into good standing with the lender before the deal closes.


There are legal issues to consider if the property is occupied by either the owner or tenants. If you’re interested in keeping tenants on to help with the mortgage, speak with your lawyer about your rights and responsibilities.

Finally, you’ll want a lawyer to review all the documents associated with the transaction to ensure the title to the house is properly in your name.

The key is to ask questions of your real estate professional and lawyer before making an offer on a power of sale home.

If you have a question for Joe about the home buying or selling process, please e-mail askjoe@reco.on.ca .

Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube.

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