Everything You Need To Know About Property Under Power Of Sale In Toronto

Real Estate


Welcome to the Urbaneer Blog, where we discuss all facets of real estate, housing, and home! I’m Steve Fudge – the proprietor of Urbaneer.com – and I’m celebrating my 34th year as a realtor and shelter consultant in Toronto, Ontario, Canada.

In our current shifting real estate market, Buyers tend to fall into two camps. The first Buyer camp tends to be inward-focused, meaning that their priority is securing a Home for their family that aligns as closely with their wishes, wants, and needs as possible within the parameters of their budget. Although the Bank of Canada issuing 10 interest rate hikes totaling 475 basis points over the past 24 months to control inflation has negatively impacted Canadian households and real estate values, the bearing this has on any Seller’s financial situation is not considered material to these Purchasers’ decision. Rather, the approach these Buyers use to determine what any property is worth is determined by two analyses. The first is assessing the value of the property based on the sum of all of its parts (much like an appraiser does). Then, because they believe ‘You Get What You Pay For’ – meaning the value of a property based on the trifecta of location, size, and condition – they would anticipate their initial assessed value would fall within the range of values of similar properties that have recently sold. If these two approaches ring true, the Buyers are usually comfortable proceeding with a purchase.

The second Buyer camp is more outward-focused, meaning their search criteria are not limited by a prescribed list of must-haves according to location, condition, or size, but instead fall under much looser but highly specific requirements. Their objective is to score the best deal. For this group, it’s less about where or what the property is, and more about the opportunity for it to reap a big financial reward in the future because they got it for a bargain. In other words, these folks are actively looking to purchase property because soaring interest rates are front-page news. Knowing there are households under financial duress, they’re on the hunt to secure the highly desperate or the forced sale before anyone else. These Buyers want the dopamine satisfaction of gaining something valuable while avoiding the potential loss of paying full price, and their sense of accomplishment is further exaggerated if they feel like they’ve outsmarted the Seller or if the bargain involved some effort on their part, like snapping it up before anyone else gets the chance.

I’m mentioning this because there’s a perception that a property being sold ‘under Power Of Sale’ is a deal in the making. And that the astute and savvy Buyer can play it to their advantage. But is that truly the case? Here is what you need to know about properties being sold ‘under Power of Sale’.



What Is A Power Of Sale?

In Ontario, initiating a ‘Power of Sale’ is the typical process used by mortgagees when a borrower fails to uphold the terms of their mortgage and defaults on their payments, or breaches a covenant in the mortgage such as failure to pay property taxes, insure the property, intentionally damaging the property, or using the property for illegal purposes or activities. Under strict legal protocol, the lender takes the necessary steps to secure vacant possession of the property and recover the lender’s principal, interest, and expenses through the sale of the property.

To accomplish this, after contacting the borrower to apprise them of the situation, the lender will mail the mortgagor notice under the Bankruptcy Act and the Farm Debt Mediation Act, and 15 days after the default deliver a Notice of Sale Under Mortgage. Governed by provisions of the Mortgages Act, the Notice is mailed by prepaid registered mail to every party shown as a mortgagor and guarantor in the mortgage, as well as to all other parties who have an interest in the mortgaged property including subsequent mortgagees, any persons with liens registered against the property, and execution creditors. After the Notice of Sale is mailed, the lender must wait 35 days (or 40 days if the property is occupied by a married couple) before taking any further steps.

During that waiting period – referred to as the redemption period – the borrower must either bring the mortgage into good standing or pay off the entire mortgage debt plus costs to retain their claim to the property title. If they do not do this, the lender can issue a Statement of Claim to gain possession of the property and collect the Debt owed by listing the property for sale on MLS and selling it. If the mortgagor does not file a Statement of Defence after the Statement of Claim has been issued, the lender can sign a default judgment and ask the court for the issuance of a Writ of Possession. Once the Writ of Possession is issued and delivered to the sheriff of the jurisdiction in which the mortgaged property is located, a date is issued to evict the mortgagors (often the homeowner and their family). If they do not move out voluntarily, the sheriff will attend and arrange for the removal of the occupants.

With vacant possession, the lender will undertake two or more appraisals to determine what the fair market value is for the property. This is both because the lender is obligated to sell the property for, or as close to, market value as possible, and to mitigate any risk the lender is accused of serving their interests.

Once the property is sold, proceeds from the sale go to pay fees incurred by the lender, followed by payment of all principal and interest on the mortgage loan, followed by any other debts or liens placed against the property. If there is anything left at this point, it goes to the homeowner. If there are insufficient funds to cover the mortgage debt and costs, the lender has the option to sue the homeowner for the balance.

You may hear the terms “power of sale” and “foreclosure” used interchangeably, but they are in fact different. The key difference is that enacting a foreclosure requires the lender to undergo a court-supervised procedure and prove to the court that the homeowner has defaulted on the mortgage agreement, typically by demonstrating the non-payment of mortgage installments for an extended period. This can take significantly longer to accomplish compared to initiating a Power of Sale which is much more efficient. And while the foreclosure can result in the homeowner losing all rights and equity in the property, lenders are more interested in recouping their debt quickly than risking their reputation by seeing a client lose their property to their favour.

Given that a POS property is sometimes listed at a competitive price (in the interest of an expeditious sale), there is often a perception that a ‘power of sale’ property represents the opportunity to snap up a great deal. While that potentially could be true, the purchase of a ‘power of sale’ property is far more complex than a traditional sale; the implied and potential risk could be greater as well.  What might appear to be a “great deal” on the surface, can end up being extremely costly – both financially and emotionally.

What makes the difference is research, being fully informed, and having a knowledgeable realtor on your side – preferably one with experience in these scenarios.

As a point of interest, here’s a Toronto Star article from December 2023, entitled, “This $3.28-Million Castle Mansion In King Is Being Sold As A Power Of Sale“.




The Right Of Redemption

Something unique to a POS property is the ‘right of redemption’, which could potentially halt the transaction; it’s a key element that buyers need to be aware of.

The power of sale process begins 15 days after a homeowner defaults on their mortgage; at this point, the lender has the right to issue a Notice of Sale to the homeowners (or any other parties who might have an interest in the property, like the 2nd or 3rd mortgages, liens, etc.). From there the mortgagor has the choice to pay off the mortgage debt (and fees and interest incurred during the period) within 35 days. During those 35 days, the lender cannot proceed with the sale.

However, even once those 35 days have passed and the lender proceeds with listing the property for sale under ‘Power of Sale’, the homeowner retains the right to repay the mortgage (sometimes even a portion of it), make financial amends, and halt the power of sale proceedings up until the closing date that a lender has entered into under contract.

This clause – and many others – will be stipulated in the Agreement of Purchase and Sale. Make sure you identify and understand each of them – with the help of your realtor – so that you fully understand all the possibilities that can occur.




Calling In A Lawyer

You must have a real estate lawyer on your team throughout the process, as several things could interfere with you from taking possession especially if the home is still lived in by the homeowner or tenants – or if there are other liens against the home.

You need to have a title search done as well, to determine who is the rightful owner of the property and who might have an interest in the property. Are there other named owners? Are there other liens against the property – perhaps for other loans, or other debts?

The lender may not be able to provide information about tax or utility accounts, which is why the Buyer should have their lawyer get a property tax certificate. It is important to note that if the property in question is a new build, property taxes may not have been established yet. If taxes are different than what is projected by the lender, the Buyer will have to absorb the cost.

Furthermore, much like an Estate Sale where the Executors cannot warrant anything about the property because they are not the owner, the same goes for a Power Of Sale. But, unlike an Estate Sale, when a property is being sold under ‘power of sale’, the lender will alter even the ‘boilerplate’ clauses in the contract – often crossing out entire sections – in addition to attaching their Schedules to the Agreement which always include multiple clauses forewarning the Buyer of, well, all the possibilities that could go wrong.

No representation or warranty for anything.

The short and sweet of it is that the Buyer must execute a comprehensive investigation of the property as part of their due diligence, sometimes even in advance of submitting an Offer if the lender is unwilling to consider conditional Agreements of Purchase & Sale.




Condition Of Property

It is important to note that a ‘power of sale’ property is sold in ‘as-is, where-is’ condition. This may not be a problem, or the home may be riddled with problems seen and unseen.  It depends on the property and the circumstances. That said, it isn’t uncommon for a ‘power of sale’ property to be in disrepair (although not necessarily) as homeowners who default on their debt are typically experiencing financial duress and lack the funds to put towards maintenance and repairs.

As a realtor who has seen it all, I recommend to all of my Buyers and Sellers to get a property inspection done (a Seller should have a third-party inspection completed so even they are fully informed) for any property purchase or sale, but it is an absolute must for a ‘Power of Sale’.

Incidentally, don’t assume everything in a home is covered by a property inspection. Click here to read Dear Urbaneer: What Is And Isn’t Covered In A Home Inspection?.

The Seller, meaning the lender, likely will not even be able to provide information about the condition of the home – or elements of it – either for information purposes or legally speaking. Repair of these items is not typically a point of negotiation, as it might be in a traditional property purchase. The lender probably hasn’t even seen the property in person and won’t be in a position to share information about pests, illegal activities that may have occurred on premises, mold, etc.

Because the lender is acting on their rights to recover their debt which is registered against the deed, items like fixtures or chattels are not even on their radar. Whether they’re in working order, or even included in the purchase, is uncertain. There may be rental items, or they may even be removed before closing with no recourse by a Buyer.

These links provide interesting facts: “Power Of Sale And Foreclosure: What Are The Risks?” -and- “Buying Or Selling A House That Is Under Power Of Sale“.





Do Properties Sold Under Power Of Sale Have An Immediate Impact On Today’s Shifting Market?

(An Excerpt From My Recent Blog ‘It’s A Different Toronto Real Estate Market, Folks!)

Since 2000, the Toronto real estate market has seen price escalations for 22 years except for two brief periods. The first was in 2008 when real estate values in the original City flatlined for a month during the US Subprime Mortgage Crisis. The second occurred in 2017 when the Provincial Liberal Government introduced a policy intervention called the Fair Housing Plan which effectively cooled the downtown housing market for four months  (*generally the suburbs suffer longer because of the homogeneity of the housing stock and Buyer profiles). Beyond those blips on the housing price chart, according to the Toronto Regional Real Estate Board (TRREB), from 2000 to 2022 the average home price in Toronto climbed from $243,255 to $1,190,749 – fueled by the voracious appetites of end-users, flippers, foreign buyers, Banks of Mom & Dad, investors, REITS, money launderers, Pension Funds, and speculators constantly competing in blind bidding wars. That’s a jaw-dropping increase of 489%.

In 2021, the Bank of Canada was becoming alarmed by the pace of inflation which in 2022 surged to a four-decade high. Driven by COVID-19 disruptions, supply chain bottlenecks, and rising energy prices, given the mandate of the BoC is to keep inflation stable and predictable, they began raising interest rates in March 2022 – implementing 10 rate increases totaling 475 basis points over 16 months – in what would turn out to be the most rapid tightening cycle in Canada’s history. The byproduct of this was significant. The BoC effectively removed the key from the ignition of Canada’s asset-based economy. After firing on all cylinders since 2000 the shelter economy was disengaged. Within weeks its momentum dragged and our once scorching hot real estate market became tepid. Since then, there have been occasions when it sputters and even idles.

This became clear when the Toronto Regional Real Estate Board’s (TRREB) MLS® System reported only 65,982 home sales in 2023. That’s fewer sales than there are TRREB member realtors which number around 73,000, and a steep decline from the 2021 sales record of 121,639. Incidentally, the last time Toronto home sales were that few was in the year 2000 when Toronto’s population was two-thirds the size it is now.

This shift has been difficult to process, particularly for an entire generation of Torontonians who have never known a market shock. Dazed in disbelief, many are hanging onto their purse strings by a thread, hoping they can extract their original investment should the bidding wars return this Spring. Although there will be bidding wars, in some areas and for some dwelling types, this doesn’t mean prices will imminently climb back to 2021/2022 levels nor does it change the optics that we’re just two years into a correction that will last at least four, if not longer.



Here is a Globe & Mail article discussing the 2024 “housing hangover”, entitled, ‘Reno Flips Gone Bad Lead To 2024 Hangover.

On the topic of those who have found themselves unable to carry their mortgage, we’ve consequently been seeing more homeowners needing to sell their property as quickly as possible (not necessarily for the highest and best price), and more properties coming to market Power Of Sale. One question being asked of late is the degree to which sales that occurred under financial duress will impact the value of similar properties located nearby. There are a lot of mitigating factors that come into play with each particular sale and, while I am hesitant to make generalizations, there are some basic truths.

First, in Ontario, when an owner defaults on their mortgage a lender is more likely to initiate a Power Of Sale because it does not require the use of the court system, making it typically a much faster process. When this happens the lender initiating the Power Of Sale is obliged to sell the property for the highest price they can get. Funds from the sale go towards wiping off the entire debt slate including the outstanding mortgage balance, interest arrears, and any commissions. When all default payments and fees have been covered, the homeowner gets whatever funds are left, if any, and the lender keeps title until it is transferred in ‘as-is where-is condition’ to the Buyer.

When a Seller under financial duress sells their property, more often than not the standard warranties in the Agreement of Purchase & Sale remain, like the Urea Formaldehyde clause warranting that the property does not contain this type of insulation which is considered a hazard. Given a property with some warranties versus one with none should be accorded a higher value, this is a consideration when looking at a property being sold under financial duress.

As I’ve mentioned in past blogs, in the original City of Toronto there is more heterogeneity in the housing stock than there is in the suburbs because more time has passed since the original dwellings were constructed. In other words, older established neighbourhoods have more properties that have been upgraded, enlarged, substantially renovated, or replaced entirely, which reduces the number of direct comparable sales making it harder to peg value. Alternatively, suburban housing stock tends to be more consistent because it’s newer and, typically, comprises a specific number of dwelling types with a limited selection of floor plans constructed over a larger geography. In many ways, a newer suburb is like a high-rise condo tipped on its side with each unit becoming an independent dwelling, being a townhouse, a semi, or detached. As a result, the more homogeneity within a contained geography – like a suburb or a large urban site that has been redeveloped in recent decades – the easier it is to peg a value because one can ascribe more similarities.

Keeping this in mind, in the freehold market the first sale of a similar property in proximity to an owner does not, in my opinion, have an immediate impact unless it’s on the same street in which case a listing realtor has their work cut out for them to demonstrate the differences. Nor does the second sale in my opinion, unless it is located closer to the owner’s property than the first one. But once the third sale is posted on MLS within the same quadrant or suburb it starts to muddy the waters because it implies a pattern.

In the condominium market, the impact can be much more immediate and hard-hitting. It will bite the most, say, in a high-density investor-owned tower like the ones in CityPlace and less so in the boutique owner-occupied buildings sprinkled across the original city in one of the many urban village neighbourhoods where the pool of product is much smaller and usually less rare to market. In the condo high-rise with hundreds of units, where 10 to 20 units may be listed for sale at any given time, a unit that sells for a substantial discount directly and immediately impacts all the similar units in the building, whether by having the same unit number (say, all the ’03’ units), or units having similar square footage. As I’ve written before, in a high-rise condo your resale value is always dictated by the most desperate of Sellers which is why I recommend buying in mid-rise buildings in desirable locations where there are fewer units. Scarcity will serve you in all market conditions.




Get The Right Strategy

All real estate purchases should be approached with caution and patience, driven by a strategy that is based on data and how a purchase aligns with your overall goals. This is even more so with a ‘Power Of Sale’ purchase. It’s easy to get caught up in the prospect of “scoring a deal”, but remember if you rush through or don’t complete due diligence, you may be met with costly surprises along the way that can quickly make that “good deal” very expensive.

Given that you may need to act quickly – and that ‘Power of Sales’ may often entertain multiple offers given their typical price point – it is wise to have your financing pre-approved before you start looking

You should rely on the support of your professional circle right at the outset to help navigate the process around a ‘Power of Sale’ purchase, particularly your realtor, your property inspector, your lender, and your real estate lawyer.  This is important, not just in mitigating risk to yourself during the purchase, but in making educated decisions about whether this type of purchase is a smart buy for the long run.

I explore what various professionals in the real estate world bring to the table in these blogs: What Does A Toronto Real Estate Lawyer Do For A Property Seller?, I’m Buying A Property. What Does A Real Estate Lawyer Do?‘, and Dear Urbaneer: Do You Have Guidance On Property Appraisals & Appraisers In Toronto?

Also, keep in mind the emotional portion of this purchase. While all home purchases are certainly emotional, a power of sale can be super-charged, because of the potential for the deal to be canceled. Some deals move through very quickly, and some longer than usual given that a lender is the Seller. Be prepared for all scenarios.



Buying a ‘power of sale’ comes with inherent risks that are not for the faint of heart. Here are some of our other posts that bring awareness to other factors impacting real estate ownership:

Climate Risk Assessment And Real Estate Values
Knob And Tube Wiring Is Still Common In Canada
Healthy Home: About The Health Risks Of Living Near Power Line
Healthy Home: What You Need To Know About Household Mold
Healthy Home: A Guide to Radon Exposure
Healthy Home: What Should I Know About Light Pollution?



Want to have someone on your side?

Since 1989, I’ve steered my career through a real estate market crash and burn; survived a slow painful cross-country recession; completed an M.E.S. graduate degree from York University called ‘Planning Housing Environments’; executed the concept, sales & marketing of multiple new condo and vintage loft conversions; and guided hundreds of clients through the purchase and sale of hundreds of freehold and condominium dwellings across the original City of Toronto. From a gritty port industrial city into a glittering post-industrial global centre, I’ve navigated the ebbs and flows of a property market as a consistent Top Producer. And I remain as passionate about it today as when I started.

Consider contacting me at 416-845-9905 or email me at Steve@urbaneer.com. It would be my pleasure to personally introduce our services.

We’d love to introduce our services to you

Serving first and second-time Buyers, relocations, renovators, and those building their long-term property portfolios, our mandate is to help clients choose the property that will realize the highest future return on their investment while ensuring the property best serves their practical needs and their dream of “Home” during their ownership.

Are you considering selling? We welcome providing you with a comprehensive assessment free of charge, including determining your Buyer profile, ways to optimize your return on investment, and tailoring the listing process to suit your circumstances. Check out How Urbaneer’s Custom Marketing Program Sold This Authentic Broadview Loft to learn more about what we do!

Consider letting Urbaneer guide you through your Buying or Selling process, without pressure, or hassle.

We are here to help!



Thanks for reading!


-The Urbaneer Team

Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-800


– we’re here to earn your trust, then your business –

Celebrating Thirty-Four Years As A Top-Producing Toronto Realtor


*Did you know we were recently listed as one of The Top 25 Toronto Real Estate Agents To Follow On Twitter! – The Top 50 Blogs On Toronto – and The Top 100 Real Estate Blogs In Canada? Consider signing up in the box below to receive our FREE monthly e-newsletter on housing, culture, and design including our love for unique urban homes and other Toronto real estate!

*Love Canadian Housing? Check out Steve’s University Student Mentorship site called Canadian Real Estate, Housing & Home which focuses on architecture, landscape, design, products, and real estate in Canada!


Previous Post
TRREB Stats Show Buyers Re-Entered The GTA Housing Market In February 2024
Next Post
Bites Of Bliss At Le Petit Déjeuner In St. Lawrence Market