When mortgages fall into default, lenders have two options available to them to recoup their funds: Power of Sale or Foreclosure.

In the United States, as now see quite often through the media, lenders take the route of foreclosure.  In Canada the preferred remedy is to sell the property under Power of Sale.  Here are the legalities of both:

Power of Sale is a provision in a mortgage agreement that allows the mortgagee (lender) the right to sell the property upon certain default by the mortgagor (borrower).   When selling by way Power of Sale, the lender will still have some obligations to the mortgagor.  When selling under Power of Sale:

• The price must be reasonable
• The mortgagee may not be able to recover costs, if they are deemed to be improvements
• The sale process needs to be expeditious
• The mortgagee must negotiate with potential purchasers in good faith
• The owner is entitled to an accounting
• Any excess funds recovered are to be remitted to the owner (mortgagor)
• Any deficiency may be recovered from the owner

Foreclosure is the legal and professional proceeding in which a mortgagee obtains a court order to eliminate the owner's right to secure a discharge upon payment.  There are strict procedural rules with foreclosure, and one error or mistake can set the mortgagee back months.

Foreclosure ends up transferring ownership to the mortgagee. The title to the property is registered in the name of the mortgagee who accepts the property in full satisfaction of the debt.  Since ownership is in the hands of the mortgagee, their obligations when selling the property are quite different than selling under Power of Sale:

• The price (or value in the transaction) need not be reasonable
• The sale process does not need to be expeditious
• The mortgagee does not need to negotiate with prospective purchasers in good faith, or negotiate with anyone at all
• Any excess funds recovered are for the account of the mortgagee
• The mortgagor has the right to have the property sold by judicial sale, converting the proceedings into a sale somewhat like a power of sale, with similar rights including an accounting and entitlement to excess funds
• No funds are remitted to the owner (mortgagor) 
• The owner is entitled to an accounting prior to the final order for foreclosure, but not afterwards
• If there is a deficiency it cannot be recovered from the owner

If you are looking to purchase a Power of Sale, keep in mind that banks DO NOT ADVERTISE their listings as a Power of Sale.  Being a full time realtor with 13 years of experience, I have the necessary tools to provide you with a computerized list of Power of Sales in Windsor and Essex County as soon as they are listed.

Do obtain a list of Power of Sales     CLICK HERE

To contact Kevin DiLuca    CLICK HERE