Definition of Power of Sale: A clause that is commonly inserted in a mortgage and deed that grants the creditor or trustee the right and authority, upon default in the payment of the debt (mortgage), to advertise and sell the property through any means available, usually MLS in Ontario, without requiring court authorization to do so.
Once the creditor is paid out of the net proceeds, the seized property is transferred by deed to the Purchaser, and any surplus money, if any, is returned to the debtor. The debtor is completely released of any interest in the property and has no subsequent right of redemption (recovery of the property by paying the mortgage debt in full).
In Ontario, most of the Power of Sales or foreclosure properties are put on the MLS (Multiple Listing Service). The reason for this is that our provincial laws are very strict about the procedure. The marketing of a power of sale property and the company or person(s) who are initiating the power of sale must do their best to obtain what is called True Market Value , and not Fair Market Value . If the property is sold significantly under TRUE market value, the owner could sue them for the difference.
To prove True Market Value , you call upon the expertise of two (2) home appraisers that will appraise of the property. The experts will analyze the value of the home and estimate the true market value. The bank needs two appraisals to defend the sale price achieved to prove the bank sold the property for true value, not market value.
What is Market Value?
Market value is defined as the probable price that a property will sell for, on the date of appraisal, allowing for a “reasonable” time to find a willing and informed purchaser, whereby neither the Seller nor the Buyer is acting under duress. In the real estate market, "reasonable" is typically one to three months. Please contact us if you would like additional information.
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