Buying a power of sale property and what to expect
Before making the plunge into buying a power of sale property please read the following blog to gain some insights into what to expect. I very recently came across a property being sold power of sale in Wasaga Beach that had great potential for my investor client. The house was listed for under $200,000,over 1200 square feet and was situated on a large lot. Unfortunately our offer was outbid but my client had major concerns even at the low listing price. One concern was not being able to enter the house prior to their offer being accepted. Reason for this was level 2 mold and that it was unsafe due to health reasons.
Buying a property in “as is” condition
The biggest disadvantage when buying a power of sale property is that the seller makes no warranties or representations. Major defects may include mold, asbestos, cracked and/or leaky foundations,roof shingle in disrepair and so on. Home buyers in the current market are quick to submit offers without the home inspection condition clause. I would advise against this especially when buying a power of sale property. Home inspectors can spot major defects that may not been seen by the naked eye.
Not guaranteed to be a great deal
The general public is under the impression that buying a power of sale property means that you are getting a great DEAL. The mortgagee(seller) is still obligated to sell the property at market value. Any extra funds remaining after the sale goes back to the original homeowner. Before jumping in with an offer to purchase have your Realtor® do an opinion of value on the subject property. Make sure it is listed at or near market value before deciding the best offer price.
Have your lawyer review the offer
Often the mortgagee(seller) will include multiple schedules to be attached with the agreement of purchase and sale. These schedules include clauses protecting the sellers interest. One such clause is the “right of redemption clause” This allows the seller to cancel the agreement at anytime if the previous home owners brings the mortgage up to good standing, although this rarely happens. Have your lawyer go over the agreement of purchase and sale and schedules. He/she will address any concerns you may have.
Other things to consider are zoning, outstanding work orders, septic systems, wells and so on. Be sure to do your due diligence before going in with a rushed offer. What may seem like a good deal now may turn into a money pit down the road.
Andrew is a Realtor® serving Wasaga Beach and all surrounding areas. Andrew deals in residential,condo,vacant land,commercial,investment, farms.