Buying a Power of Sale Property? Here’s What You Need to Know

Buying a Power of Sale Property? Here’s What You Need to Know

As more power of sale listings start to appear in the market—many triggered by defaults on private loans—it’s important for buyers to understand the risks and realities before diving in.

Unlike traditional resale homes, power of sale properties are being sold by lenders, not the original homeowners. These sales can seem like a good deal, but they come with unique legal uncertainties that every buyer should be aware of.

The Biggest Risks

1. The Sale Isn’t Final Until Closing
   Under Ontario law, the original mortgage holder (the person who defaulted) has the right to repay the debt in full right up until the day of closing. If that happens, the sale is cancelled—even if you've waived conditions and made moving plans. This creates uncertainty, especially for buyers who are also trying to sell their current home.

2. No Guarantees on Title
   Lenders selling under power of sale do not make the usual seller warranties. That means they won’t guarantee that the property is free of title issues, unpaid taxes, or other encumbrances. You could be inheriting legal or financial headaches if you're not properly protected.

Why You Need a Lawyer Review Condition

A condition of lawyer review is critical when making an offer on a power of sale listing. Give your lawyer at least 5–7 business days to review the offer and the property’s title history before firming up the deal.

This gives you:

• A chance to identify and avoid title defects or legal disputes.

• An understanding of any outstanding liabilities attached to the property.

• Protection against future legal costs that could far outweigh any upfront savings.

Bottom Line

Power of sale properties can offer value—but they also carry risk. They're not ideal for buyers who need certainty around timelines or are depending on the sale of their own home to close. If you’re considering one of these listings, it’s crucial to have the right legal advice and contract conditions in place.