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Buying a Power of Sale Property
Article
kindly provided by Bernie Jankowski with his permission.
Barrister, Solicitor & Notary Public
www.bjankowski.com
Are you considering purchasing a home being sold by power of
sale? If so, you should know how such a purchase is different
from most real estate purchases. This article will deal with the
reason why you may have unrealistic expectations about price,
and will point out some of the perils of such a purchase.
The normal real estate sale involves the owner of a property who
sells to a purchaser. In a sale by power of sale it is not the
owner who is selling the property but rather the lender. The
situation arises when a homeowner has a mortgage loan and
defaults on payment. In this situation the lender has the right
to proceed to sell the property providing the proper procedure
is followed.
A lender proceeding pursuant to a power of sale must follow
strict rules. There must be default in the loan and the ability
for the owner to correct the default. A notice must be sent to
the owner and anyone else who has an interest in the property,
which states the amount due to the lender. The notice will also
state a date by which the owner must pay the arrears and costs.
During the notice period the lender is not allowed to take any
action with respect to the property, but when the notice period
passes the property can be sold.
A lender, who sells a property for less than the outstanding
debt, may sue the owner of the property for the shortfall.
Likewise, the owner of the property may sue the lender if they
can prove that the sale was made for less than the value of the
property.
So the lender has an obligation to sell the property for the
fair value. The lender will be careful that the property is not
sold for much less than this amount because they will either
lose money, or open themselves up to a lawsuit from the owner.
In other words you may find a good price for a property but the
chances of this are the same as with an owner sold property.
There are also some downsides. Most lenders require their own
amendments to the agreement, which include such matters as the
state of the property and the redemption by the owner. The
lender will for instance give no warranties with respect to the
state of the property or even the ownership of any chattels on
the property. It therefore goes without saying that you will not
get any assurances that the appliances work or that the property
contains no contaminants.
If you have any legal questions about the contract you should
speak with your lawyer. Remember that no one but your lawyer is
qualified to give you legal advice.
Bernie Jankowski practices real estate, corporate and estates
law in Barrie, Ontario. If you have questions about this article
or real estate law in general, write to That's The Law, c/o
Toronto Sun, 333 King St. E., Toronto, M5A 3X5.
Contact Information:
Bernie Jankowski
Barrister, Solicitor & Notary Public
48 Alliance Blvd., Suite B1,
Barrie, Ontario, Canada,
L4M 5K3
Phone: (705) 735-6975
Facsimile: (705) 735-4977
Website:
www.bjankowski.com
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