Power of Sales

Are power of sales really a deal?

Most of the TV we listen to is usually US based or if it is Canadian news they are talking about what is happening in the States. Thus many people feel that getting a power of sale is a deal. Florida homes as low as $20K, Detroit homes even lower....

Here the laws are different. In a power of sale the bank has to do proper due diligence to ensure the price of the home is reflective of market value. Why? Simple - they need to collect money back to pay off debts including other creditors that are secured against the security and remaining money is given to the owners. If the bank sells the property for less then market value, the owners can go after the bank.

The bank typically out sources power of sales to Lawyers to work with Realtors that are responsible to do the proper due diligence - market evaluations, show that home was marketed effectively, report on number of visits, review of offers, and the list goes on.

The second draw back to a power of sale is that the offers typically take longer to review so leaves opportunity for other offers to come in raising the price of the property. There are several people in the market that have been condition to feel that power of sales are deals and strictly look for power of sales and these individuals are typically the ones that raise the price on these properties.

Also when looking at power of sales, one has to note the home is as is - no appliances, possibly no fixtures or window coverings. There are no representations or warranties made by the bank about anything on the property. And most importantly offers that are typically accepted are without conditions. If you are planning to purchase the home and are purchasing as is then it is recommended if you are serious that you do a home inspection prior to submitting an offer. You may be incurring the cost of a home inspection but you have the reassurance about the possible purchase and that you are not buying a bigger problem.

A final note - if considering a power of sale make sure you get a lawyer to review the agreement of purchase and sale prior to submitting the offer as the law firm representing the bank typically makes several adjustments to the agreement. In a recent deal we encountered a situation with GST where it was in addition to the price of the home. Realtors typically only see GST is on new homes and a significantly renovated homes. In this case GST was applicable as the home was registered to a business which had tax implications.

Are Power of Sales still a deal in your mind?