To buy from a vendor under foreclosure or power of sale you need to first understand what this means and how the properties got there. Both the mortgage and Mortgages Act provide methods of dealing with default. When a mortgage goes into default the mortgagee (the lender) usually wants to realize their money as soon as possible. 

Generally, the quickest method is to follow the procedure that allows the issue of a Notice of Sale Under Mortgage. This notice has to be sent to very specific people in a very specific manner. Then there is the issue of time period. They are different depending on how to process originated. In all cases the mortgagor (the borrower) has time to pay the mortgage and current costs to "redeem" the property. Even that has inherent questions.

In a foreclosure action the mortgagee (the bank) can sell the property on the market to realize its outstanding loan; or, there is another option available to the mortgagee which is called "foreclosing the property". Under this method the mortgagee can keep the property and the title is transferred to it. The mortgage disappears and the mortgagor (the borrower) no longer owes any money but the property is lost. 

 Most of the time everything is "as is" - so any defects in the property, the taxes and the title are your responsibility. Lawyers have to spend extra time and conduct a lot of more searches just to ensure you are getting a good and marketable title. Title insurance may not cover the situation or have so many exclusions as to be pointless.

Here is a list of some power of sale questions you will want to ask

1. Is the redemption period 35 or 45 days ?

2. Is the default period 15 days or 3 months ?

3. Who has been served with the notice ? Have they served all the right people and were they served properly ?

4. There must be assurance that no steps were taken during the notice period or the sale will be void.

5. Have reasonable precautions been taken to ensure market value has been realized ? 

6. Can the mortgagee give vacant possession ?

7. Does the mortgagor have a right of redemption after the offer was accepted ?

8. Does the conditions you need in the offer to satisfy yourself as to the nature of the property, place your deal in jeopardy for redemption ?

Remember that famous Latin legal maxim "Caveat Emptor" - "Buyer Beware". The purchase of distressed property can be rewarding from a financial position, provided that as a buyer, you are careful, prudent and surround yourself with professionals capable of assisting you in obtaining the property without traps of any kind.

written by Jason Schwarz.


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To:  Bart Rybarczyk