Power of sale properties

In Ontario, a power of sale property is a home that the lender (bank) is selling because the owner defaulted on their mortgage — using a legal right written directly into the mortgage, without going through court foreclosure.

This is the most common way lenders recover money in Ontario. Foreclosure is actually rare here.

How the Power of Sale process works in Ontario

1) Missed payments
After you fall behind (often ~15 days), the lender can start the process.

2) Notice of Sale (Form 1 under the Mortgages Act)
The lender sends a legal notice to:

• The homeowner

• Anyone with an interest in the property (other lenders, lien holders)

3) Redemption period – 35 days
You have 35 days to pay the arrears, penalties, and legal costs to stop the sale.

4) Lender lists the property for sale
If unpaid after 35 days, the bank hires a Realtor and lists the home on MLS, just like a normal sale.

5) Property is sold

• Sold at fair market value

• Usually “as is, where is”

• Bank will not make repairs

6) What happens to the money

• Mortgage + legal fees + interest are paid first

• If money is left over → goes to the original owner

• If the sale price is short → owner still owes the difference

Key things that are very specific to Ontario

Sold on MLS like normal homes

You won’t see a big “POWER OF SALE” sign. Many buyers don’t even realize it.

Banks must prove they sold at market value

They can’t dump it cheap. They must show they tried to get the best price.

Sold “as is”

• No warranties

• Bank never lived there

• Often no property disclosure

• Utilities may be off

• Inspections sometimes allowed, sometimes not

Offers take longer

Banks have internal approval processes. Expect delays and addenda.

Power of Sale vs Foreclosure in Ontario

Why buyers like them

• Sometimes less competition

• Occasionally priced below market

• Opportunity for renovation/value add

Why buyers get into trouble

• Underestimate repair costs

• Don’t understand bank clauses

• Expect a “deal” that isn’t really there

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