Buying a Home Under Power of Sale? Proceed with Caution

 In Real Estate Law

With the price inflation in today’s current market resulting in homes becoming unaffordable for many, Buyers are turning to properties being sold under power of sale.  While purchase prices on power of sale properties may be appealing, especially in this market, there are risks, clauses and conditions associated to proceeding with this type of purchase that Buyers should be aware of.

What is a power of sale ?

A power of sale occurs when the owner(s) of a home have defaulted on their mortgage. When owners default on their mortgage, the Lender (Bank) can force the sale of the home to recover the outstanding amount of the mortgage.

What is unique about purchasing a power of sale property?

When purchasing a power of sale property, the Lender (Bank) will include clauses and conditions in the Agreement of Purchase and Sale that are not typically found in standard purchases. These unique clauses and conditions that can be found in these Agreements include, but are not limited to:

  1. Right of Redemption

A Lender may include a clause in the Agreement that stipulates that the owner/borrower of the property is at liberty to bring the mortgage back in good standing at any time before the closing date. The owner/borrower would then be able to keep the property.  Buyers therefore need to be aware that there is a risk that they lose the opportunity to purchase the property on the day of closing, despite the fact that there is a binding Agreement of Purchase and Sale between the Buyer and the Lender in place.

  1. State of Property

As the Lender (Bank) typically has not resided in the property, it will not provide any assurances as to the state of the property on closing. Buyers purchasing a power of sale property, are purchasing the property in an “as is” condition. It is therefore recommended that the Buyers make their offer conditional upon a home inspection, so that they can be made aware of any issues at the property.

  1. No Warranties or Representations on Chattels

The Lender (Bank) will not make any warranties or representations regarding the condition, or even the ownership, of any chattels (for example: appliances) that may be found at the property. If Buyers proceed with purchasing a power of sale, they accept the risk that the chattels that they may have seen during their viewing of the property may no longer be at the property on closing. Further, following closing, it is possible for a third-party to retrieve possession of the chattels or claim payment of the chattels, if the chattel was financed.

Retain a lawyer!

Buying a power of sale property has its unique features. Buyers are cautioned to make an offer without seeking property legal advice.

This blog post was written by Stephanie Simard, a member of the Real Estate and Family Law teams.  She can be reached at 613-369-0385 or at

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