What is power of sale?
If mortgage borrower is in default of mortgage, the lender (for ex bank) can evict the property and put it for sale. In a simple language; if home owner doesn’t pay his/her mortgage payments, bank or lender can take the property and put it up for sale to recover his/her money. In this case property is being sold under power of sale.
Lender or bank has the duty to sale the property at a fair market value; after lender sales the property and pays property and other taxes, lender deducts other associated fees with sale (lawyer, real estate agent…). And then lender deducts his share (balance of mortgage) and give the remaining (if any) to the home owner. So, as you can imagine lender won’t take any profit in this process and if he/she is lucky, he/she only recovers only his money.
Depends on market situation there is a high chance that borrower don’t receive any money at the end and also lender don’t recover all his money. So, this is not an ideal situation neither for borrower nor for lender.
What options you have as home owner?
- Get a second mortgage (if you are qualified and already haven’t got it) to bring back the first mortgage into a good standing. (Technically you are buying more time with this option)
- Get a new mortgage and replace the problematic mortgage (if possible)
- Sell the property before lender takes it (you can avoid many fees associated with power of sale and save money). This could be sole option for most people. No time to waste, take action now! Know how much your home worth in today’s market is the first step.
Properties under power of sale or bank owned homes or REO (Real Estate Owned is the term used in United States) are usually interesting for most of home buyers since they might be able to buy them at a good price depends on market situations.
Be mindful that power of sale or bank owned houses for sale are being sold “AS IS”, this means the seller doesn’t warrant any potential issues with the property. If you are out in the market and looking bank owned real estate listings, be aware of potential pitfalls that come with the purchase! Remember always consult with an expert and find a good real estate agent to work with.
See bank owned real estate listing under power of sale. PLEASE EMAIL ME TO SEE ALL POWER OF SALE LISTINGS. (due to technical reason I wasn’t able to list them all here)