The Risks Of Buying A Property Under Power Of Sale
Before jumping at a cheap bit of real estate offered under a Power of Sale status, potential buyers be aware of lurking legal ramifications. Often, the contracts are written so the bulk of the liability is transferred to the current and new homeowners while the lender simply recovers the losses on a defaulted mortgage.
Issues with Ownership
Legally, lenders can technically sell a home that has gone into foreclosure but the mortgage holder doesn’t own the property, the homeowner retains their responsibility for settling the debt and can still be sued for any outstanding balances after the sale. In Canada, homeowners who can to bring their mortgage account into good standing can demand a right of redemption and stop pending contracts on a Power of Sale deal. Research the financial history of the property to clearly define specific legal obligations for each party in the contract.
Selling for Fair Market Value
Another sticky condition in a Power of Sale deal is the stipulation that the lender must not undercut the fair market value of a home just to quickly appease the debt. In fact, the current owner can sue the lender if they have undercut the price and sell the home for less than its value, meaning cheap deals on Power of Sale properties are unlikely. Typically, a Power of Sale deal with a low price is indicative of an extremely poor condition that will require extensive repairs or renovations to bring it up to market value.
Waiver of Warranties
Buyers also need to be aware that under a Power of Sale contract, the lender is free of any obligations to provide specific warranties regarding fixtures, appliances or the overall condition of the property. Usually the property being offered has not even been visited by the lender and can be suffering from undetected issues. The house may even have had the utilities disconnected or sat vacant for an extended period of time. Under the terms of a Power of Sale, all responsibility for professional appraisals falls to the potential buyer who must pay for these services themselves.
Any issues regarding current tenants are also transferred to the new homeowner in a Power of Sale deal. This often generates a new level of potential hassles that can require the involvement of local law enforcement officials.
One last expense involved in a Power of Sale contract is the necessity of hiring a professional real estate lawyer. With proper counsel, a potential buyer can be alerted to any loopholes and aware of any unforeseen liabilities and expenses that are often hidden in the fine print of Power of Sale contracts.
Stefan Hyross writes on behalf of ForeClosureEscapeArtist.com which provides solutions for home owners who are facing a Power of Sale situation.