Power of Sale - What you should know
Toronto Mississauga Power of sale: What you should know
A power of sale is a forced sale of a property by a mortgagee due to a default of one or more of the mortgagor’s obligations under the mortgage. These obligations include making payments including principal and interest, paying municipal realty taxes, providing adequate insurance on the buildings, and keeping the property in good repair.
The power of sale process is subject to strict requirements and time limits that have to be adhered to in order for it to be legally accomplished. Any lapse in the process or apparent lack of good faith in carrying out a power of sale could result in exposure of liability to the mortgagee.
A mortgagee will typically list a property under power of sale with a local brokerage that is skilled in selling that kind of property. However, the mortgagor may also have listed the property with another brokerage. The mortgagor, as the registered owner, has the authority to list the property for sale. The mortgagee, selling under power of sale, gains the authority either from the mortgage document (contractual power of sale) or by the provisions of the Mortgages Act (statutory power of sale).
A power of sale listing will usually contain a clause specifying that in the event the transaction does not close, commission will not be paid. When dealing directly with the mortgagor, the brokerage may not get paid and may be forced to sue for the commission if there are insufficient funds available after satisfying all debts.
Before a brokerage accepts a power of sale listing, it’s important to determine that the mortgagee is in a position to list the property. This is not usually a problem when dealing with financial organizations, but may be a concern when dealing with private lenders. In order to comply with the obligations imposed on a mortgagee to act in good faith and ensure that reasonable precautions are taken to obtain the true market value of the property, a brokerage should follow some basic guidelines when listing a power of sale property:
A sign should be placed on the property.
The property should be listed on the local MLS® system for a reasonable period (typically 90 days).
Fully expose the property through advertising.
Be cautious about frequent and significant price reductions.
Do not advertise the property as power of sale.
Ensure that any buyer is aware that they are buying a property under power of sale.
Banks do not operate from an emotional perspective when dealing with Buyers and their offers. The Bank may very well view many different offers before making a counter offer, If they counter offer at all.
Engage professional experienced help when negotiating with a LENDER to understand their perspective.