What Is a Power of Sale?
A power of sale is a legal process used mainly in Ontario (and some Atlantic provinces) where a lender (usually a bank or private lender) sells a property when the borrower defaults on their mortgage — without going to court. The lender sells the property, recovers the outstanding mortgage balance plus costs, and any surplus goes back to the homeowner.
Power of sale is different from foreclosure. In foreclosure (used in western Canada), the lender takes ownership of the property. In a power of sale, the lender sells the property on behalf of the owner and the owner retains any surplus proceeds.
Power of Sale vs Foreclosure by Province
| Province | Primary Process | Notes |
|---|---|---|
| Ontario | Power of Sale | Fastest — no court required, ~15 weeks minimum |
| British Columbia | Foreclosure (Judicial Sale) | Court-supervised process, takes longer |
| Alberta | Foreclosure | Court-ordered judicial sale |
| Quebec | Hypothec (Délaissement) | Civil law process, very different |
| Atlantic Provinces | Mixed | Varies — some use Power of Sale |
Power of Sale Timeline (Ontario)
- Default: Borrower misses payments
- Notice of Sale: Lender issues Notice of Sale (minimum 35 days notice)
- Redemption Period: Homeowner has 35 days to cure the default (pay arrears + costs)
- Listing: Lender lists property for sale (typically at market value)
- Sale: Property sells, lender recovers what is owed
- Surplus: Any excess proceeds go to the homeowner/equity holders
Buying a Power of Sale Property: Key Risks
Power of sale properties are sold "as-is, where-is." The lender has typically never lived in the property and makes no representations about its condition. This creates significant risks:
- No seller disclosure of known defects
- Property may have been vacated for months with damage or deferred maintenance
- Fixtures may have been removed by the previous owner
- Liens, judgments, and other encumbrances may remain on title
- Previous owner may have right of redemption until closing
- Estate sales can be complicated
Are Power of Sale Properties Cheaper?
In today's market (2025), power of sale properties are generally listed near market value. Lenders have a duty to act in good faith and obtain a fair market price — they cannot deliberately undersell. The discount, if any, comes from the as-is condition, not from a fire sale. Some motivated lenders accept slightly below-market offers to avoid carrying costs, but big discounts are rare.
How to Make an Offer on a Power of Sale
- Offer is made to the lender (or their listing agent), not the homeowner
- Lender must respond within a reasonable time but is not legally bound to the same timelines as a private seller
- Always include a home inspection condition
- Include a title search condition — have a lawyer verify the title is clean
- Be prepared for slower response times — lender decisions may require committee approval
Frequently Asked Questions
Can the previous homeowner take the property back after I buy it?
Generally no — once a power of sale closes, the homeowner's redemption rights have expired. However, if procedural errors were made in the power of sale process, a court could challenge the sale. This is rare but another reason title insurance is important.
Do power of sale properties include chattels (appliances, fixtures)?
Not necessarily. Lenders sell the property structure and anything attached. Appliances, window coverings, and fixtures may or may not be included. The listing should specify inclusions. Buyers often find appliances missing on closing in power of sale transactions.
Is there HST on a power of sale purchase?
Generally no — power of sale sales of residential properties are treated like a standard resale (HST-exempt). However, if the property is commercial or if the sale involves specific circumstances, HST may apply. Confirm with your real estate lawyer.
Can I get vacant possession on a power of sale?
The lender will typically try to deliver vacant possession, but if the homeowner or a tenant is still occupying the property, this can be complicated. Ensure vacant possession is confirmed before closing. If there's a tenant, you may inherit the tenancy under provincial landlord-tenant law.
What financing do I need to buy a power of sale?
Standard mortgage financing works for most power of sale properties. The lender may want a quick closing (30 days), so have your financing arranged in advance. Some distressed properties won't qualify for insured (CMHC) mortgages if they're in poor condition — a conventional mortgage with 20%+ down may be required.