Power of Sale?

While such properties can often be had at a bargain, and I've personally had the rewards of seeing satisfied clients purchase a power of sale and have an excellent experience on many occasions, the truth is that Power of Sale properties might not be for everyone....

The first thing to remember is, in many cases, the place will be in need of renovation. Cosmetically these homes are often in need of carpet, flooring, drywall repairs, plumbing and sometimes even electrical repairs. If you're in a position to do the work yourself and aren't afraid to put a little sweat into it then you'll be in a better position to take advantage of the potential financial benefits of a Power of Sale.

Another thing to understand is that power of sale properties are sold “as is”. It’s not a matter of negotiation, as the vendor’s required schedule to accompany any agreement of purchase and sale will indicate. Also, the seller will specifically indicate that all chattels and fixtures are "as-is" and will not give any warranty as to the fitness of such items.

Other issues to consider are that the seller will reserve the right to postpone your closing up to 60 days with virtually no notice. So if the power of sale you purchased was closing on August 1st, on July 31st you could find out that the closing has been pushed to October 1st. Even after you move in, you're not necessarily guaranteed ownership of chattels, for example, the appliances – the previous owner has a specific window of time to attempt to reclaim those possessions.

All of these “non-guarantees”, on a legal level, are to allow the defaulting time to come up with the money to reclaim lost assets. Banks and other lending institutions will not make improvements to a property that may revert back to the original owner. So what does all this mean? It means that if you’re considering a power of sale you must take into account the additional expenses (renovations, possibly appliances, and potential rental costs). Remember, since the closing can be pushed, not everyone is in a position to take advantage of power of sale properties. Most people would shy away from 60 days of renting.

Having said all of that, I have yet to see appliances be seized, (I did see a piano seized though!) the closing to be pushed, or a buyer dissatisfied with a power of sale. While much of that can be attributed to proper research and analysis, the fact remains that while the darker scenarios can be classified as unlikely they remain, nevertheless, possible.