“I want to buy a cheap property, a distress sale, Estate Sale or a Power of Sale.”
I cannot tell you how many times I have heard this statement. If a property is in distress, it means that it is hard to sell to begin with…why would that be a good buy? There is one location near me that I have watched 5 or 6 restaurants go into and close. Why does the next buyer think they will do better?
Estate Sales are often very overpriced because a lot of people are depending on the outcome and are fighting to get the highest price possible…they seldom sell for under market and remember there are usually no warranties that would run with the house because the owners are not alive anymore…
If you are considering buying a Power Of Sale, there are some important issues that you need to consider:
First, there is a big misconception that because the property is “Under Power of Sale”, that the seller is selling under duress and will accept less than market value. In reality, the Seller (often a Bank or Trust Company) is under strict instructions that the Property be sold for market value, otherwise the Mortgagor may be able to sue for any money that they can prove has been left on the table.
Secondly, the Mortgagee will make no representations whatsoever as to the property and the inclusions…it is definitely “Buyer Beware”.
Thirdly, there may be judgments against the Mortgagor that may cloud the title and you need to be prepared to be patient if you are on any deadline to close the property. You may find that you can have possession and start to live in the property but you may not have title for a while and you may have the odd surprise for years after you do own it. In the end, however, it is in every one’s best interest that you close and get a clean title.
Fourthly, because of the time that your lawyer will have to spend getting you clear title, you may want to make sure that you are dealing with a lawyer that has done Power of Sale properties before and knows what to expect and how to guide you. Get financially prepared…the lawyer will be spending more time for this unusual closing and their bills will reflect that time.
And lastly, as my friend Helen Smith, a Realtor in Durham Region noted, “In most cases, the original seller can redeem up to closing. We have seen this happen a few times in the last couple of years. Some buyers have been left without a home!
Don’t let my diatribe scare you off.
Just be aware that “Estate Sales” and “Power of Sales” have to be approached with open eyes, and lots of patience…