Sandeep Pawar
Broker
Home / Buy / Power of sale homes
Buying a power of sale home in Ontario
Power of sale homes can be good value, but the rules are different and the risks sit with you. Here is how the process works and how I protect buyers through it.
The short answer: a power of sale is a home sold by the lender after the owner defaults on the mortgage. In Ontario the owner must be in default for at least 15 days, and the lender must give at least 35 days’ notice before selling. You buy “as is, where is”, with a lender’s schedule that limits its promises. Until closing, the owner may be able to pay what is owed and end your deal. Inspect, have a lawyer read the schedule, and price from comparables.
How a power of sale works
Default
The owner falls behind on the mortgage. The lender can act once the default has lasted at least 15 days, where the mortgage contains a power of sale.
Notice of sale
The lender gives at least 35 days’ notice to everyone with an interest in the property.
Listing
The lender lists the home, usually with a schedule that limits its promises.
Offers
Buyers offer on the lender’s terms. The lender decides which offer to accept.
Closing
The lender’s lawyer registers the sale. A buyer gets good title when the sale papers are properly executed and registered.
Proceeds
The lender pays the debts. Any money left over goes to the former owner.
Where a mortgage has no power of sale clause, Ontario’s statutory power applies after three months of default and 45 days’ notice. Either way, the details are for the lawyers; your job is the price and the risks.
How the purchase is different
| Regular resale | Power of sale | |
|---|---|---|
| Who is selling | The owner, who lived there. | A lender, who has never lived there. |
| Condition promises | Some, through the standard agreement. | Usually none. Sold ‘as is, where is’. |
| Lender’s schedule | Not applicable. | Attached to the agreement, usually limiting the seller’s promises and allowing date changes. |
| Closing date | Fixed in the agreement. | May be changed by the lender under its schedule. |
| Can the deal be cancelled? | Only through conditions. | The owner may pay off what is owed before closing, ending your deal. |
| Chattels and fixtures | Listed and expected to stay. | May be missing or removed. |
| Seller disclosure | The owner can answer questions. | The lender usually cannot answer questions about the home. |
Price it from real comparables
The label is not a discount. Some power of sale homes are priced well; others are listed at full market value.
What happens
I compare the home with recent sales of similar homes nearby, adjusted for its condition.
What you do
Look past the words ‘power of sale’. Ask what the home would sell for if it were in normal condition, then subtract the work.
Documents and people
Comparable sales, listing history, notes on condition.
Watch for
Paying full price for a home that needs a full renovation.
How I help
I build the price from comparables and repair estimates, so the discount is real or we walk.
Inspect before you commit
The lender has never lived in the home and will not answer questions about it. An inspection is your only disclosure.
What happens
We inspect before the offer where possible, or make the offer conditional on inspection.
What you do
Attend the inspection. Look for water, mould, frozen pipes in winter vacancies, and missing systems.
Documents and people
Inspection report, specialist reports where recommended.
Watch for
Vacant homes can hide damage: burst pipes, roof leaks, stripped fixtures.
How I help
I arrange access with the listing agent and go through the findings with you. Inspections and due diligence.
Have your lawyer read the lender’s schedule
The schedule decides your rights more than the standard form does. Read it before you sign, not after.
What happens
The lender’s schedule is attached to the agreement. It typically limits warranties and lets the lender adjust the closing date.
What you do
Send the schedule to your lawyer before offering, or make the offer conditional on your lawyer’s review.
Documents and people
Agreement, lender’s schedule, any notices.
Watch for
Clauses that let the deal end if the owner pays off the debt, and clauses that let the lender delay closing.
How I help
I flag the clauses that matter and make sure your lawyer sees them in time.
Found a power of sale listing and want a second opinion?
Book a 30-minute callArrange flexible financing
A home in rough condition, with a closing date that can move, needs a lender who knows that up front.
What happens
Your lender reviews the property and may order an appraisal.
What you do
Tell your lender it is a power of sale. Ask whether the rate hold covers a possible closing delay.
Documents and people
Pre-approval, lender’s appraisal, insurance quote.
Watch for
A lender that will not finance the home’s condition, or an insurer that will not cover it.
How I help
I introduce you to a mortgage agent with access to the major banks and lenders, who can match the lender to the property.
Plan for the unexpected
Assume something will be missing, broken or late. Then it cannot hurt you.
What happens
Closing dates can move. Fixtures and appliances may be gone. Utilities may be off.
What you do
Keep your current housing flexible until you close. Budget for repairs, cleaning and replacements.
Documents and people
A repair budget, contractor quotes.
Watch for
Giving notice on your rental before the deal has closed.
How I help
I help you build the budget for the extras before you decide what to offer.
Close and take possession
Closing follows the usual steps, with a lawyer on each side, but the lender’s schedule may change the details.
What happens
The lender’s lawyer delivers the transfer under power of sale. Your lawyer registers it and pays land transfer tax.
What you do
Visit before closing if allowed. Change the locks on day one.
Documents and people
Statement of adjustments, title insurance, insurance binder.
Watch for
Keys, codes and remotes that the lender does not have.
How I help
I stay with you through closing. Closing day checklist.
Budget for the extras
- Home inspection, and specialist checks if recommended
- Appliances and fixtures that may be missing
- Cleaning, junk removal and lock changes
- Repairs found by the inspection
- Utility reconnections
- Extra rent or storage if closing moves
- Normal closing costs, including land transfer tax
Before you offer on a power of sale
- Fair value set from comparable sales, adjusted for condition
- Inspection done or written in as a condition
- Lender’s schedule reviewed by your lawyer
- Lender and insurer know it is a power of sale
- Rate hold and housing plan can absorb a closing delay
- Repair and replacement budget ready
- Walk-away price agreed
Are you the owner facing a power of sale, rather than buying one? Read facing power of sale: your options.
Questions buyers ask
Are power of sale homes cheaper in Ontario?
Not automatically. Many are listed near market value. The better buys tend to be homes that need work, have sat on the market, or are hard to show. Price every one from comparable sales, not from the label.
Can I get a home inspection on a power of sale property?
Often, yes: either before you offer or as a condition. Some lenders push for firm offers. I recommend an inspection on every power of sale purchase, because the seller has never lived in the home and gives no warranties.
What is the difference between power of sale and foreclosure?
In a power of sale the lender sells the home under the mortgage. Any money left after the debts are paid goes to the owner. Foreclosure is a separate court process. Ask a real estate lawyer how the difference affects a specific property.
Can the owner cancel my purchase?
Possibly. The lender’s schedule usually says the deal can end if the owner pays what is owed before closing. Have your lawyer explain that clause, and do not give notice on your rental until you have closed.
How long does a lender have to wait before selling?
Under Ontario’s Mortgages Act, where the mortgage contains a power of sale, the owner must be in default for at least 15 days. The lender must then give at least 35 days’ notice to everyone with an interest in the property.
Will the appliances be included?
Do not assume so. Lenders usually sell ‘as is, where is’ and promise nothing about chattels. Some homes are missing appliances or fixtures. Budget to replace them.
Can I get a mortgage on a power of sale home?
Yes, if the home meets your lender’s standards. A home in poor condition may be harder to finance or insure. Keep a financing condition if you can, and talk to your lender before you offer.
What if the home is still occupied?
The agreement should say the home will be vacant on closing. Ask your lawyer what the schedule says about possession, and check with your agent whether the property is occupied before you offer.
Sources
- Ontario.ca: power of sale policy, summarizing the Mortgages Act notice and default periods, title and surplus (updated 2 August 2022)
- Ontario.ca: land registration bulletin 2003-1, powers of sale
- Ontario: Mortgages Act, R.S.O. 1990, c. M.40
- RECO: buyer’s checklist
- CMHC: making an offer to purchase a home
Opportunity, with your eyes open
Send me the listing. I will price it from comparables, tell you what the schedule means for you, and whether I would offer.