More of these have been coming up, and buyers are asking about them, usually with the same underlying question: is this a bargain or a trap?
The honest answer is that it can be either, and the difference comes down to how much homework you do before you commit.
Nothing here is legal advice. This is the practical picture, written so you know what to ask your lawyer.
The direct answer
A power of sale is a lender selling a property because the borrower defaulted. You are buying as-is, with no warranties, from a seller who has never lived there and cannot tell you anything about it.
That is most of it in one sentence. The one risk that does not follow from it is that the original owner can pay off their debt and cancel the sale at any point before closing, which is covered below.
What a power of sale actually is
When a borrower defaults on a mortgage, Ontario lenders generally use power of sale rather than foreclosure.
The lender does not take ownership. It exercises a right contained in the mortgage to sell the property as mortgagee, recover what it is owed plus its costs, and account to the borrower for any surplus. The borrower keeps whatever is left over after the debt and expenses are paid.
There is a statutory process the lender has to follow, with notice periods and requirements, before it can sell. That process protects the borrower, and it is also why these properties do not appear on the market instantly.
Power of sale versus foreclosure
People use the terms interchangeably. They are different.
Foreclosure means the lender takes title to the property. Any surplus value belongs to the lender, and the borrower's interest is extinguished. It is comparatively rare in Ontario because it is slower and the lender takes on more.
Power of sale means the lender never owns the property. It sells on the borrower's title, as mortgagee, and must account for any surplus.
For you as a buyer, the practical difference shows up in the paperwork and in who is signing. Your lawyer will care about this more than you need to.
Why they are not usually bargains
This is where I would push back on the common assumption.
The lender has a duty to obtain fair market value. It cannot simply dump the property at any price, because it has to account to the borrower for the surplus and can be held to that obligation. So these are not designed to be cheap.
Where a discount exists, it usually reflects genuine risk rather than a mispricing. You are being compensated for uncertainty, and the question is whether the compensation is enough for the specific uncertainty you are taking on.
Sometimes it is. Sometimes the discount is smaller than the repair bill.
The real risks
The deal can be cancelled out from under you. This is the risk buyers almost never hear about, and it is the one I would want you to understand first.
The borrower has a statutory right of redemption. They can bring the mortgage back into good standing by paying the arrears, interest, and the lender's costs, and that right is protected right up until the sale actually completes. Not until you have an accepted offer. Until closing.
Standard power of sale schedules then include a clause letting the lender terminate the agreement if the borrower redeems. So if the owner finds the money two days before closing, the sale simply ends.
You get your deposit back. You do not get back the money you spent on the home inspection, the appraisal, or your lawyer's work to that point. And if you have already firmed up the sale of your own home to buy this one, you are now a family with a closing date and nowhere to go.
It does not happen often. It happens often enough that you should not spend money you cannot afford to lose, and you should be very careful about lining up a dependent sale against a power of sale purchase.
Sold as-is, with no representations or warranties. The agreement will typically strip out the promises a normal purchase includes. In an ordinary sale the seller makes representations about the property. Here, generally, they do not. If something is wrong, that is now your problem.
No seller disclosure, because nobody knows. The lender never lived in the house. There is no one to tell you about the leak in 2019, the addition that was never permitted, or which contractor did the basement. In a normal purchase you at least have a seller who is obliged not to conceal known latent defects. Here that safety net is largely absent, not because anyone is hiding something, but because there is genuinely no knowledge to share.
Condition and neglect. A property heading into power of sale has often not had money spent on it for a while. Deferred maintenance is common. Occasionally there is deliberate damage, because people losing a home are not always gracious about it. Missing appliances, missing light fixtures, and removed built-ins happen.
Utilities may be off. That is not just inconvenient. It limits what an inspector can actually test. An inspector cannot assess a furnace that will not turn on or find a plumbing leak with the water shut off. You may be buying with a genuinely incomplete picture, and that is worth pricing in.
Occupancy, and there are two different versions of it. Someone may still be in the property, and which someone matters enormously.
If there is a tenant, Ontario's residential tenancy rules generally continue to apply regardless of how the sale came about. You are buying the tenancy along with the building. My post on buying and selling a tenanted property covers those mechanics.
If it is the former owner still living there and refusing to leave, that is a different problem. The lender has to obtain a writ of possession from the court and have the sheriff schedule the eviction, and that takes time nobody can promise you.
So have your lawyer check what the agreement actually says about possession. An ordinary purchase agreement promises vacant possession on completion. Power of sale schedules frequently modify or remove that promise, and if the agreement does not commit the lender to delivering the property empty, then getting a disgruntled former owner out becomes your problem after closing. Find that out before you are firm, and if the answer is unsatisfactory, price it or walk.
Less flexibility, and it runs one way. Lenders are firmer on conditions, timelines, and amendments than a private seller would be. You will get little room to negotiate an extension when something takes longer on your side.
The imbalance is worth naming, though, because it is not symmetrical. Lender schedules commonly reserve the right to unilaterally extend the closing date, often by ten to thirty days, if they hit legal or eviction delays, and to terminate outright if a title problem cannot be cleared. Your remedy in that case is typically the return of your deposit and nothing more.
Practically: you have to be flexible, and they do not. Do not build a moving plan, a rate hold, or a matching sale of your own home around a power of sale closing date as though it were fixed.
Title and arrears. Outstanding property taxes, utility arrears, liens, and work orders need checking. Your lawyer and title insurance matter more here than usual.
How to buy one properly
Get a lawyer who has done these before, and get them involved early. Have them review the agreement before you sign, not after. The clauses that have been removed are as important as the ones that are there.
Keep the inspection condition. It matters more here than on a normal purchase, precisely because there is no seller history to rely on. If utilities are off, ask whether they can be turned on for the inspection, and if they cannot, treat that as a real limitation rather than a formality.
Do not spend money you cannot afford to lose, and be careful about a dependent sale. Until closing actually completes, the borrower can still redeem and end the deal. Your inspection and appraisal money is at risk the whole way through, and tying the sale of your existing home to a power of sale closing is a genuinely risky thing to do.
Budget for the unknown, generously. Whatever your repair estimate is, the absence of disclosure means your confidence in it should be lower than usual. Build in room.
Check insurance early. A vacant property, or one with older wiring or an unknown history, can be harder to insure than you expect. No insurance means no mortgage. Find this out before you are firm, not the week of closing.
Confirm what is actually included. Appliances and fixtures that appear in photos may not be there at closing. Get the specifics in the agreement.
Verify occupancy status in writing.
Have your financing genuinely in place. Less flexibility on timelines means a financing delay is a bigger problem here than elsewhere.
Who these actually suit
They suit buyers with a real repair budget and tolerance for uncertainty, buyers who can move quickly with good professional support, and investors who price risk properly and are not depending on the property being habitable on day one.
They suit less well first-time buyers stretching to their maximum, anyone whose plan has no room for a surprise, and buyers who need certainty about condition. If a $30,000 problem would sink you, the discount is not worth the risk profile.
The takeaway
A power of sale is not a shortcut to a cheap house. It is a normal purchase with the seller's knowledge, warranties, and flexibility removed, and with the possibility that the original owner redeems and ends the whole thing, offered at whatever discount the market attaches to all of that.
Sometimes that trade is worth making, and I am happy to help you make it. What I will not do is let you make it without understanding what you are giving up.
If you are looking at a power of sale in Burlington, Hamilton, or Niagara, call me before you write an offer. I will tell you honestly whether the discount justifies the unknowns on that specific property, including when the answer is no.