You may have seen advertisements in your local paper for a “Notice of Mortgage Sale” for property that is to be sold by public auction.
Generally, this means that the property owner has defaulted on their mortgage payments
and the lender, usually a bank, exercises its powers under the mortgage to step in and sell the property to pay out the mortgage owing.
The auction will take place at a time and place, as advertised in the paper, usually at the Charlottetown or Summerside Courthouse, depending on where the property is located. As a potential purchaser, you would offer a bid at the auction. Normally, the lender will have what is called a “reserve bid” which is the minimum amount that the lender will accept to sell the property. This amount is not made public and it will depend on the offers received whether or not the reserve bid is met.
As with most property transactions, there are conditions with Mortgage Sales. These conditions will vary from one property to the next. Usually, the lender will sell the Property on an “as is where is” basis. This means that as a potential purchaser, if your bid is accepted, you will not be able to negotiate on the price, if for example there is a problem with the roof or the basement. It would be prudent to have a thorough home inspection as a condition of your offer to purchase the property. Unless you are willing to finance any major repairs or renovations yourself, the lender will not negotiate the purchase price, but you will at least be able to rely on the condition to walk away from the deal.
Furthermore, the lender is only selling their interest in the property.
This means that the lender will not make any guarantees as to the title or ownership of any appliances or fixtures on the property and they will not provide a bill of sale or adjust the price with respect to any fixtures or equipment.
Although it may seem like you are getting a “deal” on a Mortgage Sale, it is important to understand any and all risks with this type of purchase.
The lawyers at Key Murray Law working in the area of Property Law would be happy to answer any questions you may have regarding the purchase of a property by Mortgage Sale.
Derek I. Bondt
Legal information appearing in this article and elsewhere on Key Murray Law’s website is intended for informational purposes only and is not intended to substitute for or replace any legal or other professional advice. If you have specific concerns or a situation in which you require legal advice, you should consult directly with one of our lawyers.