In Ontario real estate, a Power of Sale is a legal process that allows a lender (typically a bank) to sell a property when a borrower defaults on their mortgage. Unlike a foreclosure, the lender does not take ownership of the property. Instead, the lender has a contractual right under the mortgage to sell the home or condo to recover the outstanding debt. These sales are typically handled through the Toronto MLS system, but are often hidden, its not always obvious if a home is a power of sale.
Power of Sale properties have often below-market opportunities for buyers, particularly for those willing to take on some risk or invest a bit of work. A lender’s objective is to recover the outstanding mortgage balance, not to maximize profit. Pricing can sometimes be very competitive.
That said, there are important differences buyers need to understand:
- Properties are sold strictly “as is, where is”.
- No representations or warranties are provided by the seller.
- Chattels are excluded, even appliances present during showings may be removed prior to closing.
- There is a higher risk of property damage or deferred maintenance, as homes may have been vacant, neglected, or in some cases intentionally damaged.
- The bank will not provide the same level of disclosure a typical homeowner would. Ultimately, they have no prior knowledge of latent or patent defects in the home.
Interestingly, one of my very first Toronto real estate purchases was a Power of Sale. It turned out to be a great deal, but it required renovations, all of the appliances were removed the day before closing. In the right situation, these properties can offer excellent value, but they’re best suited for informed buyers who understand both the opportunity and the risks involved.
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