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Summary: A power-of-sale property is one a lender is selling because the owner defaulted on the mortgage. For buyers the differences are real: it is sold as is with no representations, vacant possession is not guaranteed, and the lender must still seek fair market value, so the price is rarely a giveaway.
Power-of-sale listings sit on the market beside every other home and can look like an ordinary deal. What sets them apart is the paperwork and the risk, because the seller is a lender rather than the person who lived there. Here is what changes for a buyer.
What is a power-of-sale property?
A power-of-sale property is a home a lender is selling under Ontario's Mortgages Act after the owner defaulted. The lender sells as mortgagee, not as owner, and title passes from the defaulting owner straight to you.
You rarely deal with the former owner at all. The lender controls the terms and signs as the seller, which is why the process feels different from a normal purchase. For the mechanics of how a power of sale unfolds from the owner's side, see our guide to power of sale in Ontario.
How is buying one different from a normal purchase?
The biggest change is who is selling. Because the lender never lived in the home, it sells "as is, where is," strips out the usual promises, and shifts most of the risk of the unknown onto you.
Standard sale | Power-of-sale purchase | |
Who sells | The owner | The lender, as mortgagee |
Representations and warranties | Usual agreement promises | Struck; sold "as is, where is" |
Seller disclosure | Often a property information statement | None |
Vacant possession | Normally provided | Not guaranteed; occupants can remain |
Which terms govern | Standard OREA agreement | The lender's schedule prevails |
A few practical risks follow from that:
You get no disclosure. The lender has never lived there and provides no property information statement, so latent defects become your problem after closing.
Vacant possession is not guaranteed. A former owner, or a tenant protected by the Residential Tenancies Act, may still be in the home, and removing them can fall to you.
The lender's schedule overrides the standard terms. Most power-of-sale agreements state that the lender's schedule prevails over the familiar Ontario Real Estate Association (OREA) clauses, so the schedule is what actually governs your deal.
Chattels may be gone. Appliances and other items are often excluded, or simply missing by the time you take possession.
Are power-of-sale homes actually cheaper?
Not necessarily. The lender has a legal duty to act in good faith and take reasonable steps to obtain the property's true market value, so a steep discount is less common than the reputation suggests.
That duty, long established in Ontario mortgage law, requires the lender to give the property adequate market exposure and run a commercially reasonable sale rather than dump it cheaply. Below-market sales still happen and are lawful, but a lender that ignores the duty can be challenged. The real value in a power-of-sale purchase tends to be a motivated seller and a cleaner, faster deal, or a property that needs work, more than a bargain sticker price.
What should you check before you buy?
Treat a power-of-sale purchase as a due-diligence exercise. Because you get no disclosure and limited recourse, the checks you would normally lean on the seller for are now yours to run.
Get an inspection where you can. Condition is your risk, so inspect before your offer is firm if the lender allows access, and budget for repairs you cannot see.
Search title and buy title insurance. Your lawyer confirms the lender can convey clear title and that other charges are paid out of the proceeds; title insurance covers what a search cannot.
Confirm the vacant-possession terms. Read whether the lender provides vacant possession or leaves any occupant to you, and price that risk into your offer.
Read the lender's schedule first. It prevails over the standard agreement, so the schedule, not the clauses you are used to, is what binds you.
Line up financing early. An as-is property can complicate the appraisal, so confirm your lender will finance it before you commit.
Frequently asked questions
Can you get a mortgage on a power-of-sale home?
Usually yes, but the as-is condition can affect the appraisal, so confirm financing before your offer is firm. A property missing major systems, such as a furnace or plumbing, can be harder to finance.
Do power-of-sale homes come with vacant possession?
Not always. The lender often will not evict, and a tenant protected by the Residential Tenancies Act can remain after closing, so confirm the possession terms in writing before you commit.
Can the former owner still stop the sale before closing?
Rarely. The lender can only sell after the redemption period, generally 35 days from the Notice of Sale, has passed. Once that window has closed and the agreement is signed, the owner's chance to redeem has usually ended, and your lawyer confirms this on title.
Are power-of-sale properties sold below market?
Sometimes, but often not by much. The lender must take reasonable steps to obtain the property's true market value, so steep discounts are less common than the reputation suggests. Any savings tend to come from the property's condition or the timing.
Do I still need a real estate lawyer to buy one?
Yes. A power-of-sale purchase has non-standard paperwork and higher title and possession risk, so having a real estate lawyer review the schedule and the title before you commit is essential.
About the author
Joel Fox is a co-founder and COO at Ownright. He helps run the firm's day-to-day work on Ontario residential closings, refinances, and sales, and writes regularly to demystify the parts of a transaction that most homeowners only encounter once or twice in their lives.
At Ownright, we focus entirely on Ontario residential real estate law. We handle purchase closings, including power-of-sale purchases, reviewing the lender's schedule and confirming title so you know what you are taking on. You can start your purchase online or get in touch with any questions.
Legal references: Mortgages Act, R.S.O. 1990, c. M.40; Residential Tenancies Act, 2006, S.O. 2006, c. 17. A mortgagee's duty to act in good faith and take reasonable steps to obtain the property's true market value on a power of sale is established in Ontario mortgage case law.
Important note: This article is not legal advice. No one should act, or refrain from acting, based solely on the information in this post or any linked materials without first seeking appropriate legal or professional advice.
