Over the summer, I've been receiving many purchases involving vendors who held defaulted mortgages on properties. They were selling under power of sale, which means that the home owner had not kept up with his or her end of the bargain (usually it means that s/he hasn't made timely mortgage payments).

Many of them went off very smoothly where the purchaser was able to get a key and enter the property right away with some minor repairs that needed to be made. Others had much more significant repair issues. Still, others had some severe legal problems surrounding them.

One that comes to mind involves a purchaser who had decided to sell her home and move into a cheaper one which she was buying under power of sale. The closing had been scheduled for 10 days from the date of the agreement and was put onto my desk on the date of closing as her original solicitor had decided not to close it. After putting everything together, the matter closed a day late, but from a legal perspective, it was essentially completed. I informed the real estate agent that it was closed and reminded her that vacant possession (i.e. that nobody would be in the house) would not be provided on closing, as specified in the agreement, and she said she would make arrangements with the client to remove the previous resident. With some help from the vendor's solicitor, the client moved in. However, it took her 9 days after closing to get in.

It was my first deal seeing someone not receive vacant possession on closing, although I had been consulted on a power of sale matter involving a tenant on the premises. There are reasons from the vendor's perspective as to why vacant possession could not be granted, but I won't get into that.

The main point is why someone would sign such an agreement. I've spoken with several real estate agents and they've had mixed feelings about power of sale properties. They all agreed that people believe that they can get a good deal on property under power of sale, but the overall cost isn't always worth it. In nearly all power of sale transactions that I have seen, the properties have been damaged in some way, requiring some level of repair.

Furthermore, certain factors can put the agreement to an end. My client who had purchased the property was also selling her home. If the borrower/previous owner had been able to obtain the funds necessary to pay off the mortgage, the agreement would come to an end. This is a typical clause in most power of sale transactions. So had the previous owner somehow come up with the money, the deal would be at an end and my client would be left with no home.

I figured I'd give some advice to those looking to buy under power of sale, based on my observations so far:

- Have a backup plan in case the deal goes bad so that you don't have to spend money staying at a hotel until you can find a short term rental or a property to purchase.

- Review the agreement carefully and make sure you are comfortable with its terms. You should consult a lawyer prior to signing the agreement.

- Be prepared to pass on a property, even if the asking price is low. You may be forced to deal with other issues (possession, tenants, etc.), which can take time and money to resolve.

- Be prepared to make repairs or pay for them as most properties are in less-than-stellar shape.

- Be flexible on the move in date (there can sometimes be financing issues with power of sale transactions or new title defects).

- Don't be pushed into it by your real estate agent (some power of sale properties have 6% real estate commission versus the industry standard of 5% for resale homes).

There is no formula that one can follow when purchasing a property under power of sale, so I'll say it again: Speak to your lawyer prior to signing an agreement. It could save you thousands of dollars, a lot of time, and a lot of headaches.