Power of Sale Properties
WHAT YOU SHOULD KNOW BEFORE BUYING
Power of Sale properties and what you should know before submitting an offer.
Over the course of my 37 + years as a real estate agent, I have been on the listing/selling side, and representing buyers who wish to purchase a home listed under Power of Sale. I sold a property a couple of years ago which was under Power of Sale. I had many clients and perspective buyers asking me about Power of Sale properties. Most people think they can “get a good deal” and potentially purchase the property at less than market value.
This is a misconception many people have as this is not the case. The Bank or Financial Institution holding the mortgage and now selling the home must sell the property at fair market value. If they don’t they risk being sued by the previous owner for selling at a lower amount. The Bank must get at least the outstanding amount owing on the property, plus sufficient funds to pay the commission. Any surplus is paid back to the owner.
Once the Bank has taken possession of the property, after default by the owner, the Bank takes full control of the property and usually lists with a Realtor on MLS to get the property sold. They typically require 48-72 hours for irrevocable time, and only review/accept offers during business hours.
- There also some pitfalls associated with buying a power of sale property.
- No warranties are associated with the property, or its condition
- The property is usually sold in “as is” condition
- There are no warranties associated with any appliances, if any are left behind
- No warranties of ownership of any chattels on the property
- There are no warranties of any contaminants or hazardous material that may be present
- Typically, the lender does not allow for any inspection conditions in the offer… If you want an inspection you must conduct that prior to submitting an offer and depending on the findings, decide if you want to proceed.
- The previous owner has up to the 11th hour, even if a firm offer has been accepted, to bring his mortgage payments current and re-claim his property.
- Banks usually includes many schedules and it would be prudent to have your lawyer review these prior to signing.
Therefore, getting a “good deal” isn’t always the case with Power of Sale properties. There is some risk level associated with these properties, and you could end up having your contract negated if the owner brings his mortgage payments up to date before the property changes ownership.
You should ensure you get all the information associated with Power of Sales. Your real estate agent or lawyer relative to the laws in your area, can provide information before signing on the dotted line!
