Power of Sale Homes in Ontario: What Buyers Should Know
In today’s challenging real estate market, many buyers are looking for opportunities that are not immediately obvious. Power of sale homes are one such opportunity. These properties are sold by lenders when homeowners cannot meet their mortgage obligations, giving buyers a chance to purchase homes below market value.
However, success in this market requires strategy, preparation, and careful due diligence. This guide explains everything you need to know as a buyer in Ontario.
What Is a Power of Sale?
A power of sale occurs when a lender (usually a bank or financial institution) takes steps to recover the mortgage balance from a homeowner who is in arrears.
Unlike foreclosure, the lender does not take ownership of the property—they sell it to recover the money owed.
It’s important to understand:
The homeowner can still redeem the mortgage up until closing by paying the arrears, which would end the sale.
The lender’s goal is to recover the debt, so the property is sold as-is, often quickly, and sometimes below market value.
Why Power of Sale Homes Are Increasing Today
While power of sale homes appear in any slow market, the current increase in Ontario is tied to specific economic conditions:
During the pandemic, buyers frequently overbid on homes, sometimes $50,000–$100,000 above asking.
Low interest rates made these monthly payments manageable at the time.
Since then, interest rates have soared, and have not returned to pre-pandemic levels.
The economy has not rebounded as expected, in part due to international factors such as tariffs and uncertainty in the U.S.
Home values have dropped sharply across the country, leaving many homeowners unable to afford their mortgage payments.
The result is a growing number of power of sale listings — homes where timing, strategy, and risk management are more important than ever for buyers.
Key Risks Buyers Need to Understand
Buying a power of sale home is not without risk. Key considerations include:
Properties are sold as-is, with limited disclosures and no warranties from the seller.
Outstanding liens, mortgages, property taxes, utilities, or rent-to-own obligations may exist.
The homeowner can redeem the mortgage up until closing, which may affect timing or even cancel the sale.
Deferred maintenance or other hidden issues may be present.
Due diligence is critical. Buyers should:
Confirm the seller has funds to clear the mortgage, liens, taxes, utilities, or other encumbrances.
Ensure professional inspections are completed.
Factor all potential costs into their strategy before making an offer.
Understanding and mitigating these risks is essential to make the opportunity work in your favor.
Inspections, Financing, and Due Diligence
Even though power of sale homes can represent value, buyers must:
Hire a professional home inspector (I cover this cost for my buyers).
Confirm comparable sales in the area to ensure you are not overpaying.
Set up financing in advance, accounting for liens and other obligations.
Work with trusted professionals, including mortgage brokers, to navigate any potential financial complications.
Careful preparation ensures you are buying with confidence, rather than taking unnecessary risks.
When Power of Sale Homes Make Sense
Power of sale homes are ideal for buyers who:
Are prepared and informed about the risks.
Can move quickly when an opportunity arises.
Want to leverage market knowledge to find value in a slower market.
These properties are not for everyone, but for strategic buyers, they can be an effective way to purchase a home below market value
while avoiding bidding wars and overpaying.
Final Thoughts
Power of sale homes are one of several strategies buyers can use in today’s challenging market. The current increase in these listings is not random — it’s a direct result of pandemic-era overbidding, soaring interest rates, and falling home values.
Success in this market requires more than chasing deals; it requires strategy, preparation, and due diligence. Buyers should:
Understand the property’s legal and financial status, including mortgages, liens, taxes, utilities, and any rent-to-own obligations.
Confirm inspections and comparable values before making an offer.
Be aware that homeowners can redeem the mortgage up until closing, which can affect timing and certainty.
When approached strategically, power of sale homes can present real opportunities — but only for buyers who plan carefully, verify all risks, and make informed decisions.
In today’s market, the right strategy matters far more than luck.