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Allison McMurter-Hughes recently sat down with Gary Hibbert to tape an episode of Hibbert’s popular real estate podcast, Real Talk With Gary. Their conversation was chock-full of information about foreclosures, power of sales, closing disputes and using vendor take backs (VTBs). You can listen to the full episode here and below is an excerpt specific to foreclosures.

Why don’t we see many foreclosure properties in Ontario?

You may have clients who are looking for a ‘deal’ when it comes to real estate, but these deals are few and far between. Dare we say there is no such thing as a deal in real estate?

Often if the price of a property seems too good to be true, it likely is. Your clients may have heard of the “deals” that can be had south of the border in a foreclosure, but because of the way Ontario law has developed, you are unlikely to find such a deal here. This is primarily because the Ontario court has evolved case law to try to ensure that the homeowners are not unfairly deprived of equity from their home where the lender sells following a mortgage default.  

But what about foreclosure properties?

Foreclosure properties are rare in Ontario - the more equitable remedy of power of sale is often employed in place of foreclosure.

Quite simply, foreclosure is expensive for all parties involved as it is fully court-supervised, and often unfair to the homeowner as the lender may get to keep excess funds over and above what they are owed. Even if the lender applies for foreclosure it is unlikely to be granted except in very limited circumstances. As a result, lenders often employ power of sale instead of foreclosure.

In a power of sale, lenders are required to sell the property at “fair market value” to ensure the homeowner receives as much as possible once their registered debts are paid. This is why the market in Ontario is less likely to produce “deals” even where the lender is selling the property.

How does foreclosure or power of sale work in Ontario?

The lender has exhausted all options to receive payment from the homeowner. Or the homeowner has defaulted, and they see no other way out than working with the lender to sell the property. The lender must provide the requisite notice to the homeowner that they are moving towards power of sale. The process does give the borrower many opportunities to stop the power of sale by paying the mortgage in full via refinance or selling the property themselves.

Once the property is sold, lenders would be made whole, any second mortgages would get paid, and anything left over would go to the homeowner.

If you have questions, we have answers.

If you have any questions about real estate law, please connect with us.

McMurter & Associates has been providing real estate legal services for over 30 years in the Durham Region. We strive to provide you with straightforward and useful advice that you can use in your business. If you have found this useful, please share this information with your colleagues, or better yet, invite them to sign up for the newsletter!

If you have any questions about your real estate transaction, we are available Monday to Friday, 9am until 5pm.  Email: info@mcmurter Phone: 905-666-9200.