4. Power of Sale - A Brief Overview of the Major considerations regarding Power of Sale

| POS Overview | Bank Options | Legal Aspects| Standard Charge Terms | POS Considerations | Quit Claim | Foreclosure | Power of Sale | Issues | Sale Price | POS Process | POS appropriate? | Clauses in Offer | How will Lindsay Protect you? | Conclusion

Now that you understand the basics of mortgages I will give you an overview of Power of Sale.

Briefly explained, Power of Sale is the power to convey title to another person, free and clean of the previous owner and/or free of any encumbrances.  This means that when a property is sold under POS the new buyer will receive the property free and clear (except for any money they borrow and in return have a mortgage put against the property) .

The main points of power of sale:

• The vendor is selling as mortgagee, not the owner.  It's the bank that is selling their interest in the property as mortgagee not as owner of the property
• After the sale of the property all the prior encumbrances (mortgages or liens) are paid out and any subsequent encumbrances, those registered after the bank that registered their mortgage against the property are extinguished.  Thus, a first mortgage sells the property under POS, the second mortgagee loses their right and their claim is gone after the sale, whether or not there is any money left over from the sale to pay the second mortgagee.
• if the bank sells for more than the total debt and expenses owing on the property, the remainder goes to the previous owner (the mortgagor), thus POS is a 'fair remedy'
• if the bank sells for a price less than the debt, the bank can sue for the outstanding balance.
• the bank may need to go to court to obtain possession - since POS is NOT automatic possession

Advantages of Power of Sale

• time - no court action is required in POS, it's much faster to sell under POS than to sue for possession and then sell (called foreclosure)
• cost - the entire procedure is conducted from a solicitor's office, no court is involved
• service - notice is served by registered mail to the owner whereas court action would require service given personally
• deficiency after sale - the bank can sue the previous owner

Disadvantages of Power of Sale

• possession may be difficult to obtain if there are tenants - if there are tenants then the Tenant Protection Act takes precedence and the tenants are entitled to remain in the property until the end of the lease
• difficult to remove any person who is in possession (living inside) of the property, no matter who it is, always requires court action if they refuse to leave

The next section discusses one of options that are open to the banks when an owner defaults, a Quit Claim Deed

This series of articles about Power of Sale Properties, Foreclosures and advice when you purchase a power of sale property is brought to you by Lindsay Schenk  Please understand that these are my personal thoughts and experiences, do not use my information herein as legal advice and always professional seek legal advice on any issue pertaining to real estate and especially Power of Sale.

| POS Overview | Bank Options | Legal Aspects| Standard Charge Terms | POS Considerations | Quit Claim | Foreclosure | Power of Sale | Issues | Sale Price | POS Process | POS appropriate? | Clauses in Offer | How will Lindsay Protect you? | Conclusion

If you have any questions or require further information about Power of Sale properties or anything to do with real estate, please send me an email

I can assist you with all of the complexities when you purchase or sell your next home.  Please don't hesitate to email me

Thank you,
Lindsay

You may read more about Power of Sale, Bank Sales and Foreclosure Properties

or go back to list of Real Estate Helpful Articles

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What is a Foreclosure Property?  What is a Power of Sale Property?

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Sign up to receive Foreclosures, Power of Sales and Bank Sales for MLS listings and properties in Mississauga and Oakville Would you like to receive the new residential Power of Sales or Bank sales or Foreclosures in the Mississauga, Toronto, Oakville and GTA areas?  This would include new power of sale and bank sale listings as they are added to the MLS database system.  You may fill in the fields below and click "Sign Me Up!"   What is a power of sale property? POS disclaimer Your Email: Your Name:       By submitting this form you are agreeing to these terms.  Everyone who fills out this form is now automatically signed up to receive my real estate newsletter.  You can always unsubscribe after you receive your first issue.  It could be worse!   You may read the latest issue of my On-Line Real Estate Newsletter before you decide. Yes, I agree to the above   I would have signed up anyway Yes, I agree, but I would prefer not to sign up Agents and Realtors beware You will receive a very fast answer from Mark.  Thank you and have a great day! Definition of Foreclosure or Bank Foreclosures:  A situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank or building society, can seize and sell the property as stipulated in the terms of the mortgage contract. Power of Sale and Tax Sale properties - questions and answers What is a Power of Sale Property? When a borrower defaults on a home mortgage, the lender may attempt to recover its losses by selling the property under power of sale. 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 using standard methods such as the MLS or at public auction, without resorting to a court for authorization to do so and without actually taking possession of the property. 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 previous owner (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 once title has transferred to the new buyer. You will often see advertisements about Court Auctions, Pre-Foreclosures, Homeowners in Bankruptcy, HUD Homes, VA Homes, Government homes and similar sounding wording.  In my experience, many of these types of investment property opportunities come out of the US and are not as common here in Ontario.  In our trading area, most of the POS, Tax Sale properties or foreclosure properties are put on the MLS before they reach the point of foreclosure.  The reason for this is that our provincial laws are very strict about the procedure and marketing of a power of sale property and the company or person who is initiating the power of sale must do their best to obtain what is called TRUE market value as opposed to fair market value for the property, otherwise if the property is sold too far under TRUE market value, the owner could sue them for the difference.  Another reason is because power of sale is much less expensive remedy for the lender to attempt to get their money back. What's an estate sale? What is a Distressed Sale?   Why fix up run-down homes?  Sadly for the previous owner, the answer is simple: Your potential accelerated wealth creation. Adding value to run-down homes through quick cosmetic rehabs is one of the most powerful leverage tools available to property investors.  Traditional 'buy and hold' strategies are too slow for the investor looking for accelerated wealth creation.  On the other hand, buy and hold strategies show strong price growth over time and seem to work well here in Ontario and the GTA. Please understand that these are my personal thoughts and experiences, do not use my information herein as legal advice and always professional seek legal advice on any issue pertaining to real estate and especially Power of Sale. You may use this form to subscribe to automatically receive power of sale and bank sale listings in Mississauga, Oakville and the GTA.