Power of Sale Homes

Power of Sale Homes

Power of Sale homes are being seen more frequently on the MLS. In most years it is not unusual to see a few, but beginning this year there have been many more.

In this challenging economic environment it is not at all surprising that people that were unable to replace lost jobs would eventually find themselves unable to hold onto their homes.

In the background of this unfortunate situation, the bank has tried to work with the home owners to correct the mortgage default, and negotiations have been going on for months, because the Mortgage Act has been designed to protect the home owner.

Eventually however, the bank is left with having to take the property, something no bank wants to do, and sell it themselves.

U.S. Influence.

In the United States the term used for a bank repossessed home is a Foreclosure and the rules are very different. Canadians are used to watching, on TV, bus loads of people going to auctions and bidding on Foreclosed homes that sell at rock bottom prices.

Those images create a very misleading and unrealistic picture of what is possible in the Canadian landscape. Power of Sale homes must follow very strict rules and here are just a few:

Market Price.

The home must go on the market at the current market price ( market price and value are different, but beyond the scope of this article) The U.S. situation has given Canadian home owners the idea that these homes are somehow cheaper than other homes on the market, which is incorrect. The Mortgage Act states that the bank must offer the home for the current market price, and can only take what is owed to them in delinquent payments, and the rest if any must go back to the home owner.

The home owner has a right to sue the bank if they can prove the home was sold for less than its value. There is no such thing as rock bottom auction prices in Canada.

AS IS Condition.

One aspect of Power of Sale homes that is similar to Foreclosed homes is the condition you see it in is the condition you buy it. No warranties or conditions are made about the home.

Often times there are no appliances, light fixtures, stair banisters, ceramic or hardwood flooring. The home owner has stripped the place clean, often out of frustration, and that AS IS condition is how you must purchase the home.

More than market price!

Finally, since real estate is local, in some areas of the GTA Power of Sale homes are selling for more than market price, because there are multiple offers on the home. The low inventory of homes on the market, accounts for this phenomena.

For additional information on Power of Sale homes contact me.