Real Estate

Power of sale house for sale?

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Deal Addict
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Nov 9, 2007
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Toronto

Power of sale house for sale?

Does anyone have any experience in purchasing a power of sale house? Like I know the bank is the seller but in regards to price negotiating etc. Say if you offer 95% of the asking price do they usually let the house go since they really aren
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Newbie
Nov 20, 2007
37 posts
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Tore on toe
We put an offer on a POS house, about 20% below asking. The offer was rejected even though the house was on the market for a long time and needed some work.

So I studied the process to understand how it works.

Apparently, the bank has a legal responsibility to sell at market value. The listing broker - who represents the bank gets an estimate of the work to be done and prices it less accordingly. Also remember that once an owner defaults on the mortgage, it takes between two to three months from date of default before it comes on the market. so there is a maintenance lag and also the owner would not have had spare cash to maintain it for a couple of months before default.

So expect some work to turn it around.
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Jul 3, 2005
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POS sales here are unlike the ones in the US, the bank will not sell below market value.
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Jan 14, 2007
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GTA North
Our first house was a Power Of Sale.

This was in 1992 but we picked it up for $8k below what other houses in the neighbourhood were selling for, dealt directly with the bank through our agent, and gave them a quick closing which I think was key. I know the bank sold the house for less than they were owed on the 1st mortgage by about $12K and the 2nd mortgage holder got nothing.

A power of sale has more risk involved with the potential for former owners or creditors showing up but our experience was very good and only the electric company came by asking for $800 in unpaid hydro. One call to our lawyer and it was quickly dealt with.
Member
Nov 4, 2007
368 posts
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you can definitely offer lower than asking on a POS. True they may reject it, but market value is an estimate, not necessarily a set figure. If they estimate the market value is say $300k, but the highest offer is $280 and it's been on the market for a while, they might just sell. But if you're saying you want to pay 95% of their asking, depending on the property, I might offer 90%, and hope for a counter offer of 95%. But if it's a really nice property, and they do get more than one offer, you might lose out.

IMHIP2, I'm surprised your lawyer didn't check what was owed before closing.
Jr. Member
Sep 6, 2008
155 posts
Power of sales in Canada are hardly ever a good idea. The seller must sell at the appraised value or higher. Also, there is most likely to be heavy damages to the home from the previous owner.
Negotiation is much easier with the actual owners over a firm. You can, also, confirm everything in the house easier as well.
The deal is much easier to be processed with the mortgage specialist as well.

In this market especially I would not touch a Power of Sale, because there are too many bargains that you can get a lower price than fair market value.
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Jul 25, 2008
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I've yet to see a single power of sale which has been a good deal. Since any surplus money from the sale has to be given to the original owner, banks have an obligation to sell at "market value" or the original owner can sue them. Thus, a lot of the power of sales that I have seen have been overpriced dumps.

Combine this with the fact that all power of sales are sold "as is" and it just seems like too much of a headache to me.
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Dec 24, 2002
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mmhassa2 wrote:
Sep 9th, 2008 1:59 pm
Does anyone have any experience in purchasing a power of sale house? Like I know the bank is the seller but in regards to price negotiating etc. Say if you offer 95% of the asking price do they usually let the house go since they really aren
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Jul 4, 2004
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licious wrote:
Sep 11th, 2008 8:20 am
I've yet to see a single power of sale which has been a good deal. Since any surplus money from the sale has to be given to the original owner, banks have an obligation to sell at "market value" or the original owner can sue them. Thus, a lot of the power of sales that I have seen have been overpriced dumps.

Combine this with the fact that all power of sales are sold "as is" and it just seems like too much of a headache to me.
That's pretty much right, my wife is a real estate agent and so I've been following the 'power of sale' listings in Ottawa for the past several years (the information available to the general public will often not indicate that it's a power of sale, agents have access to more information which will often (although not always) say it. In that time, I've only seen 1 power of sale that I considered a good deal. We made an offer as well as 7 other prospective buyers within a few hours of it buying on the market - we didn't get it but I know it was another agent who did. As licious said, in this case, the vendor could have easily sued the bank because they did not get as much as they could have (actually they accepted the first offer (which was actually several thousand dollars below ours and much below the highest offer) which would have screwed them right away (actually not sure why they did this because they require 48 hours on offers anyway so the bank could and should have waited to see if they got other offers before accepting it)). Fortunately for the bank, I believe the owner wasn't even in Canada anymore so he's oblivious to all of it.

You *can* get some deals with power of sale but it's usually maybe 5-10% off market value if you're lucky (not 25%-50% off market value) and there is very significant risk. For investors, power of sales are pretty much not worth it since the possible savings don't offer enough profit margin especially when considering the risks. For owner occupied, you can save a bit but you need some luck and more importantly, the property you want needs to become available as power of sale which is pretty rare.

In Canada you have 'power of sale' and 'foreclosures'. With power of sale, the bank is simply exercising it's right to sell the property if the owner defaults on the mortgage but they have to get a reasonable price (i.e. at or near market value) for it. With 'foreclosure', the bank goes to court and then actually takes over ownership of the house and then they can do whatever they want for it (i.e. sell it for whatever they get). Technically with foreclosure, you could get a better deal but from what I've seen it, very few houses actually go to foreclosure (the housing market in Canada is good enough that banks can sell at power of sale) - some do go up for auction but they usually end up being pulled before they are sold - and the ones that do really aren't worth anything at all.
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Jun 12, 2007
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suidmach wrote:
Sep 13th, 2008 9:32 pm
Congratulations on the house. Since it is a POS house make sure you do a full appraisal/inspection before the waiver date. Especially if it is 'sold as is'.
In Ontario, the bad thing with a Power of Sale is that it's totally loaded in the bank's favor. There's a saying :" You can get a cheap price because you are getting a lessor product". It's strictly as-is and you lawyer will need to do his own checking (i.e. sometimes a survey isn't even available)

Everyone interested has to make an unconditional offer to the bank and leave it open for a couple of weeks. The bank then opens all offers at the same time and picks one.

You can do your inspection when it closes and if anything's missing like the furnace/AC or the appliances - too bad. I heard one story about how the staircase was missing on closing - that was $20K to fix. It's strictly as-is, where-is.

The other bad thing is that if the old owner can suddenly come up with the money for the mortgage in arrears right up to your closing, then the bank will cancel your deal possible leaving you in a lurch
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