Power of Sale. What Homeowners Need to Know | Best Real Estate Agent for Power of Sale in Toronto

If you're struggling to keep up with your mortgage payments, you may be worried that a Power of Sale is unavoidable.But falling behind on your mortgage doesn't necessarily mean you don't have options. The earlier you recognize the warning signs and take action, the more options you may have to protect your home, your credit and your financial future.

In this video, we explain what a Power of Sale is in Ontario, how it differs from a regular home sale, and some of the steps homeowners can consider before the lender takes control of the property.

00:41 What Is a Power of Sale in Ontario?
01:05 How a Power of Sale Takes Away Your Control
02:10 How a Power of Sale Impacts Your Financial Future
03:04 Why It’s Challenging to Rent After a Power of Sale
03:56 What to Do If You’re Struggling With Mortgage Payments
04:52 Can Renting Out Part of Your Property Help?
05:43 Can You Stop a Power of Sale by Paying Arrears?
06:13 Should You Sell Before the Lender Takes Over?

A Power of Sale is a legal process that allows a mortgage lender to force the sale of a property when the homeowner has fallen behind on their mortgage obligations. Unlike a regular home sale, where the homeowner controls the timing, marketing, offers and the final sale price, a Power of Sale shifts control of the selling process to the lender.

The impact can also extend beyond losing your home. A Power of Sale can have serious consequences for your credit and financial future, and finding another place to live becomes much more difficult afterward. That's why it's so important to address financial difficulties early rather than waiting until the situation becomes more serious.

If you're struggling with your mortgage payments, start by communicating with your lender and finding out what options may be available to you. You can also look at ways to reduce your monthly expenses or generate additional income from your property. Depending on your circumstances, you may also be able to stop the Power of Sale process by bringing your mortgage back into good standing.

And if you know you simply cannot afford to keep the property, consider speaking with an experienced real estate professional before the lender takes control of the sale. You may not need to sell. But if selling is the best option, there is a significant difference between choosing to sell while you still have control and waiting until the lender takes control of the sale.

Want to Discuss Your Options?

If you're watching this because you're worried about your own mortgage situation, please don't wait until things get worse before looking at your options.

Our team is happy to have a confidential conversation with you about your real estate options. You may not know what the right next step is yet, and that's okay. We can help you understand your choices and determine what your next best steps could look like.

Prefer to read the full discussion? The complete transcript from the video is below.

A lot of homeowners assume that once they start having difficulty making their mortgage payments in full, that a Power of Sale is unavoidable and there’s nothing they can do.

But the reality is, there are warning signs before a situation reaches that point — and the good news is, there are steps you can take to possibly still keep your home, protect your credit, and to give yourself better future options.

One of the biggest mistakes I see homeowners make when they’re struggling financially, is simply waiting too long before looking at their options, and taking action.

So in this video, I’m gonna explain what a Power of Sale is, why it has a serious impact, and what you can do before the lender takes control of the situation.

SECTION 1 – WHAT IS A POWER OF SALE?

So, a Power of Sale is a legal process where a mortgage lender, such as a bank, forces the sale of a property, even if the current owner doesn’t want to sell it. 

This situation happens when a homeowner has fallen behind on their mortgage payments, and the lender has decided to sell the property to recover the money that’s still owed to them, and at the same time, the lender is cutting their future losses. 

It’s important to understand that a Power of Sale is very different from a normal home sale, especially how it negatively impacts you as the property owner.

So for a bit of context, in a regular home sale, the homeowner is in full control. And the homeowner decides when to sell the property, how to market the property, and most importantly, the owner decides whether to accept an offer, which determines the final sales price. 

SECTION 2 – YOU LOSE CONTROL OF THE SALE

Now on the other hand, when it comes to a Power of Sale, the lender takes full control of the selling process. It’s the lender who decides how the home should be prepared, how the property should be priced, which offer will be accepted, and they’re also the ones who decide the final sales price. In this situation, the homeowner has very little say in what happens with the property - the owner is no longer making key decisions about the sale, and they must cooperate with the lender to facilitate the sale.

SECTION 3 – THE IMPACT GOES BEYOND LOSING YOUR HOME

Now, I want to talk about something that a lot of homeowners might not be aware of - and it’s the importance of taking action as early as possible to avoid a Power of Sale. You want to avoid a Power of Sale because the process has such a negative impact on your financial future for at least the next few years. 

I want to acknowledge that if you’re watching this because you’re already under financial pressure, I understand you might already feel overwhelmed. There can be a lot of stress about how you’re going to make your next mortgage payment and you might be avoiding communication with your lender because you just don’t know what to say. It might even feel like we’ve already made too many mistakes to fix the situation, but the good news is that the sooner you act, the more options you have.  

That’s why it’s critical to take the next step, even a small one, because a Power of Sale has a serious negative impact on your credit and on your financial future.

For example, if you wait until a Power of Sale is enforced, you might not have a home to move into next, because you likely won’t be in a financial position to purchase another, smaller home to downsize into. 

And I know we might be thinking about renting a place instead. The reality is that, it’s going to be extremely challenging to rent a place. Most landlords, including property management companies that operate apartment buildings, they pull up the credit history of rental applicants because they want reassurance that the person renting their property has a good history of paying their monthly mortgage or paying their monthly obligations on time.

So if you wait too long to take action, you could end up in a very difficult situation where you’ve lost your home, you can’t qualify for another mortgage, and you’re also having trouble securing a rental. I’ve seen clients having to move in with relatives or friends next, and some even have to consider homeless shelters, after a Power of Sale was completed. 

And this is why I’m emphasizing the importance of taking action as early as possible, because you might be able to prevent all of this.

SECTION 4 – DON'T WAIT FOR THE PROBLEM TO GET WORSE

So the first preventative step you can take is, addressing the situation rather than ignoring it. The longer you wait, the fewer choices you’ll have.

If you’re starting to have trouble keeping up with your mortgage payments, condo fees, property taxes and the other costs of living, sit down and figure out if there’s a way to budget your lifestyle to make ends meet. It might help you to sit down with someone knowledgeable on finances, who can advise you - this might be someone from your bank, a trusted real estate professional, or even a friend. 

And if you’re already receiving letters and emails from your lender, please communicate with your lender. Tell them what’s happening and ask them if they have options to make your payments more manageable.

The worst thing you can do is stay quiet and hope the problem somehow fixes itself. Because guys, that won’t happen. The problem will only continue to grow and I’ve seen clients loose their property to the lender, simply because for whatever reason, they chose not to communicate with the lender.  

SECTION 5 – LOOK AT WAYS TO BRING IN MORE INCOME

Another great preventative step is to look at whether your property can generate additional income.

For example, if the property is a two-bedroom condo, consider renting out that second room. Or if  the property is a house, consider renting out the basement as a separate unit. These are some suggestions that will help bring in additional income. It’s just a temporary measure and it’s not going to cost you more time taking on a tenant, whereas taking on a second job for instance, will take up more of your time. And if the new rental income helps you meet your monthly payments, this one action will prevent you from losing the property. 

At this stage, it’s about looking at every reasonable option that could help you stay financially stable. We want to do this before reaching the point where you’re forced to sell the property or, a lender takes over.

SECTION 6 – IF YOU CATCH UP ON MISSED PAYMENTS

Now, as a side note, if you’re able to come up with enough money to pay the mortgage arrears — which include the payments you’ve missed, plus the other amounts you owe — you can likely stop the Power of Sale process.

It’s very rare to come into that much money for someone who’s struggling to make their full mortgage payments, but if you’re able to get the money together, don’t assume that it’s too late to stop the process. 

Talk to your lender right away and find out exactly what you need to pay to bring the mortgage back into good standing.

SECTION 7 – SELLING IT YOURSELF IS THE BETTER OPTION

And lastly, if you know you simply cannot afford to keep the property, you’re better off selling the home yourself before the lender starts the Power of Sale process.

I know that selling your home might be the last thing you want to hear when you’re under financial stress. But there is a very big difference between deciding to sell your home yourself and having the lender take control of the sale.

Just remember - if you sell the property yourself, you’re still in control when it comes to reviewing offers and negotiating the sale.

CLOSING

In summary, if you or someone you know is starting to feel financial pressure around housing costs, just know that you’re not alone.

I know that taking action can be the last thing you feel like doing when you're financially stressed and worried. 

Start small by taking the next step and calling your lender. Find out what options they have. 

And look at ways you can reduce your monthly costs while considering how you could possibly bring in more income. 

At the same time, it’s a good idea to consult with an experienced real estate agent to learn about your options for the property. You might not need to sell. But if selling is the best option, I would much rather see you make that decision yourself, while you still have control of the sale. Don’t wait until the lender takes control for you.

If you’re in this situation and you want to understand your real estate options, reach out to our team. We’re happy to have a confidential conversation with you and help you figure out what your next best steps would look like.