A property sold by power of sale means that it is not the homeowner, but the mortgage lender, who is selling it. It is a solution that is made available to lenders when homeowners default on mortgages. If you are interested in this as a buyer, here are some of the things that you should know about power of sale transactions:
You should reign in your hopes for a discount! Just because emotional attachment is out of the equation it doesn’t mean that you’ll get the house for a lower price. There is actually a law that obliges lenders to get market value for a property. Also, please remember that the appliances are not included in the sale.
The house will be sold in its current condition “as it is”. There will most probably be no warranties from the lender. Bear in mind that a homeowner with the knowledge that he or she will be losing the house pretty soon will probably not be motivated enough to keep it in a good condition or even do the necessary repairs. Like you would with other properties, you should protect yourself by ensuring that your offer is conditional based on your satisfaction with the inspection.
Watch out or listen for the term “right of redemption” which simply means the owner can bring the mortgage back with the lender anytime, as long as the deal with you is not closed yet. So until you have the contracts signed and the keys in your hands – don’t get too excited about the house.
Make sure you have a real estate agent and a lawyer by your side to review all the transaction documents. If your purchase pushes through, you have to make sure that the title of that house is properly transferred to your name.
If you are considering renting it out to help you with the mortgage, you have to know about the legal requirements of a property that is occupied by tenants. It is a lot different from the conditions if you, the homeowner, live there. Be sure to discuss this with your lawyer so you can be made aware of your rights and responsibilities.
Most people say that purchasing power of sale properties is a little more complicated than your usual house-buying journey. You should not take this road alone. Get professional assistance from a reliable real estate agent and your trusted lawyer to make sure that your transaction remains smooth from start to finish.