Help – the bank wants to sell my home under a Power of Sale. Is there any way to keep my house and/or my credit rating?

A Power of Sale is where a bank or lender has evicted the occupants of a home for failing to pay off their mortgage (often referred to as “defaulting” on their mortgage payments) and are now taking steps to sell the property. The lender is under an obligation to sell the property at fair market value. Any proceeds of sale over and above the debt, the late payment interest, legal fees etc. go back to the homeowner, so the lender doesn’t make anything on a Power of Sale beyond what they are entitled to receive under the mortgage.

A Power of Sale is different from a foreclosure, although both are legal processes arising from a default in the mortgage. In a foreclosure, the mortgage-holder actually takes title to the property, rather than simply having the right to sell it. Because of this distinction, the homeowner is not entitled to any proceeds of sale.

So what impact does a Power of Sale have on a buyer?

Well, there are never any warranties by the lender, so the Buyer really has to do their due diligence. They need to verify taxes, lot size, have a home inspection etc. to make sure there are no nasty surprises. There are a lot of clauses in the agreement the lender will want the prospective purchaser to sign, so the buyer will want to insert a clause allowing their lawyer time to go over it and give them advice. Often the lender will require a lengthy period of time themselves to review any offer submitted by a Buyer before they decide whether to accept it or not. Sometimes they want a hefty deposit up front too.

These properties are often not in good shape. Sometimes they have no appliances. They may be dirty or bug-infested, and in desperate need of repairs. Because of the obligation not to sell them below fair market value, they can be over-priced and get quite stale-dated. Before the prices come down to the point where a buyer is interested, the lender can be carrying the properties for quite a while, so it’s not an ideal situation for them either.

The homeowner has what is called a right of redemption right up to the point of sale, which means the buyer can have an accepted offer, pay the deposit, pay for their inspections and lose the property if the homeowner is able to come up with the money to make the overdue mortgage payments and costs. That’s not usually a big risk, but it still adds uncertainty to the purchase. Because of all of this, it can take a while to sell a home under a Power of Sale: they don’t show well, the prices may be higher than market value, and there is a crazy amount of due diligence required on the part of a buyer.

From the homeowner’s perspective, then, it’s always better to try to refinance the property before it hits the Power of Sale (or foreclosure) stage. If that’s not possible, it’s best to sell before things get too far out of hand.

I’m always surprised to see Power of Sale listings in a hot market like the one we are in now in Ottawa. This is because if there is enough equity left in the home to cover the mortage plus late payments and penalties and realtor commissions and legal fees, we can get that home sold quickly for top dollar before it’s too late. And we can often find a buyer willing to take immediate possession.

Bottom line? If you are having problems, call a realtor. We’ll refer you to a mortgage broker to see what they can do for you in terms of re-financing, in case it’s possible for you to keep your home, and we’ll let you know if we can help you sell your house. Bring your mortgage paperwork with you: this is one where we really need to know the numbers before we can offer any help: we can’t work for free, so there has to be enough money to pay our commissions. However, in a market that has gone up on average 8.7% this year and is still rising, there may be more equity in your home than you thought.

 

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How far will a realtor go to get a deal? This realtor kept working on an offer even after she broke her ankle!

How’s that for clickbait, LOL! (I’ve always wanted to start a blog post with one of those, “you’ll never believe what happened!” ledes — finally  I get to use one!)

Anyway, I was showing some first time buyers a property on Friday night. I knew they would love the property as soon as I saw the listing, and I’d spent all day getting ready for them to put in an offer: I had a draft offer ready, had talked to the listing agent, had checked the survey, etc. I KNEW they were going to love it and they did.

I rushed them over to see it after they finished work so it was a little dark out. It was a beautiful house, immaculately maintained, and they loved it the moment they walked in. I knew we had to get an offer in quickly as there had been other showings already, and it was listed at a price where I was sure there would be other interested parties. So they jumped in the car while I put the key back in the lockbox.

The front step to this property looks like a deck and the way the boards were configured, from my vantage point, it looked like one level. So I stepped onto what I thought was solid ground to find it wasn’t.  As soon as I hit the ground, I knew I was badly hurt.

I limped over to the car and told my clients (and their parents, who were with us) that I’d fallen. Luckily, they hadn’t noticed, so at least I was spared that humiliation, but by the time we got to  my office to do up the offer, my foot had swollen up like a balloon.

I called the other agent to say we would be putting in an offer, and she said she’d just received one, meaning we were in a multiple offer situation. (My clients kept offering to take me to Emergency, and I was like “No!” (teeth gritted), “We’re going to get you this house.”

I limped around at the office scanning and emailing pages; by then, it really hurt.

I told the other agent I’d fallen down and joked I wouldn’t sue her clients if her clients accepted my buyers’ offer. My client’s mother was kind enough to run home and get me an ice pack, but I didn’t have time to apply it until we headed off to a local pub to wait for the seller’s response; that’s when I realized I couldn’t take my shoe off. I hadn’t eaten all day and by then I was getting shaky, but looking back, I now know that I was actually in shock.

We ended up at my place to wait for  the counter-offer (by then the Carling office was closed) and my foot looked like this:

ankle

I’m very happy to say my buyers got the property (and I was as thrilled as they were). As soon as they left my home, I packed on more ice and tried to sleep, but it was impossible – I was in too much pain. By then, my foot looked like this and I was starting to suspect a fracture.

ankle 2

So I got up, because I couldn’t sleep anyway, got myself dressed and drove myself to the Perth Smiths Falls hospital’s Emergency room. It’s 45 minutes away but I knew a small Emergency department would be able to see me sooner that I’d get seen in Ottawa, and sure enough, at 5:30 AM, I was the only person there.

The emergency doctor was great. She said I had torn at least two ligaments and she suspected a fracture as well. X-rays confirmed that the tendon had torn away from the bone, taking a bone chip with it. She prescribed a walking cast and referred to an orthopaedic surgeon. She told me to use lots of ice and elevation, and told me to stay off the foot as much as I could. I came back to Ottawa and purchased the walking cast, and went to bed for close to 15 hours. So, it’s a bit of a pain for sure.

But the good news (and there was a lot of it) was:

1) My buyers got the house! There is no way that would have happened if I’d gone to Emergency instead of doing my job. And they are so happy! I’m thrilled for them.

2) The listing agent and I had a real bonding moment over this. We had lots of back and forth (she was so kind, offered to help, even volunteered her Curling Club if I needed anything). Even though we didn’t know each other before, I have a sense we’re going to end up being really good friends. We’ve already made plans to have coffee.

3) It could have been much worse; it’s a small fracture, and it will heal. The torn ligaments are painful, but hardly fatal. I know lots of people with mobility issues whose problems will never get better; mine will. And this will give me a first hand look at how they navigate those issues (I’m already finding out how hard stairs are to climb when you can’t put your weight on one foot). All of this will make a better realtor.

4) I had so many wonderful offers of help from my pals on social media, especially Twitter. They offered to pick up wine for me, lend me crutches, walk the dog etc. which was fabulous. It was pretty amazing, actually — I’m so grateful to the really lovely people who follow me on Twitter and the great friendships I’ve made because of it.

And finally, 5) now my buyers know to put some reflective tape or something on the edge of that deck so no-one else falls and gets hurt. Better me than them. Seriously.

So it’s all good, just a little inconvenient. I was really sorry to miss the Hallowe’en party I had planned to go to last night. I’d spent a lot of time on this damn parrot ( you can guess the costume).parrot

But I plan to wear it to the office this week, and I told the listing agent I would leave the gingerbread cookies I’d made for the party at her seller’s home the next time I’m there, so she and her clients can enjoy them. So really, it’s all good!

gingerbread-2-e1540849294651.jpg

 

Update: this is me, Day #4. Swelling is worse and so is the discolouration. Now I’m thinking I really should dress up as The Walking Dead!

ankle day 4 3

 

 

 

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My Latest Blooper Column: Watch out for exploding windows!

I have stopped writing my regular blooper column for REM, but it seems my eye for catching bloopers is still there and my fellow realtors never disappoint!  This late summer/early fall batch of bloopers begins with a chill in the air and appropriately enough, a listing that features “Two frieplaces.”

With Hallowe’en around the corner, who wouldn’t want a “Costume kitchen with pantry and stone counters”? Might be hard getting the fridge up the stairs to the front door to shout “Trick or Treat,” though.

The second level in this new listing “hosts a leg master, ” which makes me think of a dominatrix, for some reason.  Now there’s a costume that kicks! Along the same lines, here’s a listing blooper that made me smile: “Further upgrades include new pain.”

I loved this listing, which notes that the “town is offering grant money up to $5,000 dollars for beatification.” I didn’t know sainthood came at a price, but that does seem like a reasonable price and a nice additional feature.

As is this “laundry level on upper level across from bus station.” Nothing like a laundry with a view!

I smiled at this listing with its new “sub pump.” Because you certainly do not want your submarine to sink. Remember Das Boot?

If you’re an animal lover, or perhaps a veterinarian, you’ll be happy to know that the recent renovations in this new listing “include duck work.”  I have never worked with poultry in the trades, but I suppose the duck was brought in to fix the quacks. (Badaboom!)

I loved this unintentional gem: “24 hours irrevocable on all offers to arrange family members.” I wonder if they are arranged according to height, like a family portrait, where no one quite looks at the camera at the same time and  there’s always a little kid with his finger up his nose.

This new listing made me smile: “The lower level is ideal for a quest.”  I keep thinking of Don Quixote and Pancho Sanchez: sure hope the back yard has a windmill.

Schrodinger’s cat apparently lives in this new listing: “Unfinished finished basement offers additional storage.”

I’m not sure about this aggression expressed in this new typo: “Be the fist to live in this spectacular new Pied a Terre.” Freudian slip?

Talk about a home for commuters: “urban living with distant design.” There’s also an “Idea property for renovation contractor” for sale right now, although I think most would prefer bricks and mortar.

How about a home that features a “covered deck and mushroom area”? Personally, I find a mudroom a little more useful, but then, that’s just me.

I’m guessing this home would be well-suited for tailgate parties: “The basement features a full bar and lots of driveway space, perfect for entertaining.” Kind of like this multi-purpose garage that  doubles as some kind of butler’s pantry: “A single car attached garage provides access to the kitchen which provides for ample storage & counter workspace.”

I suspect this feature might turn a few off buyers, but they can’t claim they weren’t warned, thanks to the All-Caps lettering: “HUGE AND BRIGHT LVGRM WITH EXPLOSIVE WINDOWS.” Nothing like having to call the Bomb Squad to open and close your windows.

If you’re looking for something a little more mellow, and less dangerous, this property features “9 foot ceiling with pot lines throughout the main level.” And then there is this calm, quiet listing that comes with “composed decking.” So much better than angry decking, don’t you think?

I love the idea of a home that’s been “inspected by a hope inspector” — such a great idea. In troubled times like these, we could all use a little hope.  And maybe a leg master.

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One decorating trend worth following – encaustic tile!

Yesterday, I blogged about a few trends to avoid, but here’s a current trend I love: encaustic tile. These are ceramic tiles where the colours are embedded as layers rather than glazed or painted patterns, and they can have two colours or be multi-coloured, although you don’t tend to see more than four or five colours, including white.

Encaustic tile can come in sheets with a pattern embedded into it, or be composed of individual tiles that are installed to form a pattern. They are made of ceramic or porcelain and are often hand made or hand printed.

Originally, I saw these tiles on-line and loved them, but I didn’t see them in person until Euro Tile started stocking them this year. Now many of the big box stores are carrying a good variety as you’ll see below.

This first one is the one I installed in my investment condo and one of the first patterns I saw, back in May: Burnside - encaustic

These particular tiles were in  large sheets that required a water saw to cut, so they were finicky, and super thick so great for a foyer. They have a slightly worn look that I really liked as well. The tiles, without installation, worked out to about $ 325 for this space.

A less expensive option (or options) can be found at Lowes. I helped a client pick out this tile for the ensuite bathroom in her new home: they are individual ceramic tiles and much easier to install. I think they looked gorgeous, and I know she’s very happy. I suggested a light grout so as not to detract from the pattern.

These Merola tiles from Home Depot show the variety of tiles, and the range of prices in just one line (black, grey and white).

encaustic 4

They have others, also by Merola, in other colours: these three coloured blue and white ones are gorgeous:

encaustic 6

And here’s a four colour example carried by Home Depot (white being the fourth colour):

encaustic 5

And here’s a five colour one I bought at Euro Tile that’s just waiting for my next renovation! This is one that I can see working equally well at a cottage — I love the rich colours.

encaustic 3

These are tiles that can be used in a front foyer, a bathroom, or a laundry room, to add a graphic touch or an old world feel. Tiles like these have been around in Europe for hundreds of years and are still gorgeous, so it’s a trend I think we can live with for a long time.

When I was at Euro Tile picking up mine, every single contractor in the lineup was buying them, too. The nice thing is that there is so much variety in colour and pattern that nothing is cookie cutter. Just lovely!

 

 

 

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Three current decorating trends to avoid!

I do a lot of renovations each  year, helping clients get their homes ready for sale, so I am always seeing homes that are dated and homes that are timeless. Here are some of my thoughts on current trends that I think will date your homes very quickly.

Glass strip mosaic tile backsplashes.  I’m already seeing glass mosaic tile backplashes that look dated. Be careful with this one: there are some glass mosaic tiles that will look good ten years from now but those narrow strip mixes of glass and coloured tiles really date your house. trend 1

 

Blue kitchen cupboards. Cabinets are big investments. Stick with neutrals or you’ll find yourself paying to have them re-painted in a couple of years. If you really want that pop of colour, put it on an island, not on all your cabinets. It will have a more timeless quality and if you do decide to switch it out down the road, it will be a lot less expensive!

trend 5

 

Giant hexagonal tiles. Don’t get me wrong; I love hexagonal tiles. In an entry way or bathroom, they can be gorgeous. But the current trend of cutting them into hardwood? Uh, not so much. I think the novelty will wear thin pretty quick.

trend 4

 

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I want to buy a house that’s for sale by owner. What do I need to know?

The first thing you should do is contact your realtor so that they can do up a proper offer. A lot of times, an owner will hand you an Agreement of Purchase and Sale (the offer) which they’ve completed for you and ask you to sign it. That’s a mistake!

It’s not just a matter of putting in a price and closing date. There are conditions that should apply in almost all cases: financing and home inspection are two but they can vary depending on all kinds of factors. Is there a pool? What if it’s winter – how would you know if it’s working? Is there a septic system? A well? Depending on the age of the house, there may be aluminum wiring or asbestos concerns that could affect your financing or your insurability. Your offer should have clauses that protect you in all kinds of contingencies.

Realtors deal with offers daily; we know what clauses to put in to protect you. Real estate lawyers review offers but rarely are asked to draft them. I can’t tell you how many times I’ve had a lawyer contact me and ask me my advice – so contact your realtor for help on this one!

Your realtor will first check with the seller to make sure they are “cooperating” i.e. that they are willing to work with your realtor’s brokerage and pay a commission. If the seller is willing to cooperate, the seller pays all commission fees so there is no cost to you. If not, then your only options are to pay your realtor’s commission yourself (whatever you can agree to) or  work with your lawyer on preparing an offer, but be prepared to pay for their time. You can’t expect this kind of work to be done for free.

Lawyers are busy people as well: it may take them some time to prepare the offer and review it with you, whereas a realtor can have it ready quickly to go over it with you, usually in a matter of hours.

If the seller agrees to pay the commission, your realtor can take charge. They will likely make arrangements to view the property with you in person first so they know what they are dealing with. They will let you know if they see any issues with the condition of the property or other issues that might affect value.

They will make note of various things that need to be reflected in the offer and confirmed with the seller.  These can be things you might think are obvious: Are appliances included?  Is there an automatic garage door opener? Is there a community mailbox?  Is anything under warranty?

These are a few examples of things we want to mention in the offer so that you don’t move in and discover the seller took the fridge with them, or removed the dining room chandalier without your knowledge, or left you with a garage you can’t open, or without any way to access your mail.

In a sale by owner, we have to verify pretty much everything as we can’t rely on what the owner tells us. I recall seeing one property where the owner told me on the phone that the furnace was brand new. When I got there with my buyer and took a look, it was easily twenty years old. New to that owner, maybe, who was elderly, but definitely not new! It’s not uncommon for sellers to think their properties are wider or deeper than they actually are, or misremember taxes, or other information.

Your realtor will look up the legal description, lot size, sales history on that property, MPAC assessment for taxes, and verify that the owner really is the owner. I had one situation where the person we were dealing with in a sale by owner turned out not to have any interest in the property at all. He  had no authority to enter into negotiations, so that one’s important! If it’s an estate sale, your realtor may ask the seller for a copy of the probate; if it’s a corporate owner, they may ask for signing authority to be confirmed as well.

Your realtor will check comparables in the neighbourhood. They will let you know what the sellers paid for the property and when, and if it’s been listed before and how long it’s been on the market. They’ll advise you on price. Most private sellers over-estimate the value of their properties, in my experience, so you need to have that kind of input. The price should at least be in the range of what’s fair and your realtor is in the very best position to let you know what’s reasonable.

If you still want to put in an offer once you have that input, your realtor will draft up the paperwork that makes it clear to the seller they are representing your interests and not those of the seller. They will prepare documentation to confirm the commission that will be paid by the seller, and then prepare the actual offer itself.

Most times, the seller will want to review all of this with their lawyer before responding with a counter-offer or acceptance. This is absolutely fair, but that also means the negotiations are likely to take longer than usual, as normally it’s the seller’s realtor who reviews the offer with their client and they are more readily available on weeknights and most weekends than most lawyers.

The problem this poses in a hot market with that kind of delay is that another offer could come in in the meantime. Be aware that the seller is not bound by the same ethical considerations as realtors. There is nothing to require them to tell you if they have other offers, or how many; they might tell you they have received offers when they haven’t, and they can even tell  another buyer what you offered to pay: we can’t.

If you do reach a deal with the seller, your realtor will stickhandle the deposit. We prefer that these be payable to our brokerage rather the seller’s lawyer, as if the deal falls apart, the seller can instruct their lawyer not to return the deposit to you, and then you’re in a bit of a pickle. (We have a bit more control if the deposit is being held on our end. If the deal doesn’t go ahead, we will do up the mutual release and termination documents.)

We will arrange for a home inspection, if that was a term of the deal (as it should be most times), and will send the documentation off to your financial institution or mortgage broker, and from there on, things will proceed pretty well as normal. We will be there with you for the home inspection, negotiate any necessary amendments if anything shows up in the inspection that’s a problem, remove the conditions as appropriate and get the deal firmed up or advise you if it looks like this is one to walk away from.

One thing to be aware of is that in a private sale, the bank or whoever you are using for financing will insist on an appraisal, even where the property has been listed on MLS as a “mere posting.” I’ve seen sales by owner where the frontage or lot depth was incorrect; where condo fees were wrong, and even one where a semi-detached home was described as detached. (This is why we go to take a look ourselves; we have to verify information in a private sale beyond the steps we’d take in a normal listing.)

A final point: while the law requires a seller to disclose latent defects, i.e. defects that would not be obvious to a buyer or that wouldn’t show up in a home inspection, you can’t assume that they have made full disclosure of anything. A private sale is no time to give up your right to a home inspection ; in fact, it may be the time where you want to exercise your right to have other inspections done by those with specific expertise, like plumbers and electricians.

A private sale is one situation where it really is “buyer beware” so you are best advised to play it smart, and use a realtor, even if the seller has chosen not to.

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Easements and Right-of-Ways – why are they important in row units?

Well, I just had an interesting experience. I was looking at making an offer on a row unit which is the middle unit of three. It is fully fenced and backs onto NCC bike paths. The NCC’s metal fence that runs along the bike path forms the back fence of this unit.

There is a gate in the shared back yard fence between this unit and one of the units beside it. A gate usually connotes an easement or right of way, permitting the middle unit owner reasonable access through the neighbouring property when they need it.

This could mean the middle unit owner bringing around a lawn mower from time to time, for example, that is stored in a garage or shed at the front of the house, and is too inconvenient or too big to bring through the house.

It can mean letting trades have access to bring in their materials and equipment when installing new roofing or siding or windows at the back of the house. Landscaping would be another reasonable access use, as it is impossible to bring wheelbarrows of sand or dirt through the front door.

But just because there’s a gate and a registered easement or right of way, it doesn’t mean you can use it for anything.  Your kids can’t decide to use it to play hide and seek in the neighbour’s back yard without the neighbour’s express permission; that’s not reasonable.

Anyway, I did up the offer and I checked the legal description of  this property and the ones on either side of it. No easements or right of ways appeared in the legal descriptions, which meant that access rests on the goodwill of the adjacent owner.

I contacted the listing agent who said that the same neighbour owned both the adjacent units and was a pretty genial  guy, but he suggested I do my due diligence, and I agreed.

I decided to go take a look at the back of the property from the vantage point of the NCC bike path  before I went any further. Standing on the bike path, I could see that the gate in the fence between the two units was actually blocked on the neighbour’s side by a cable.

So I tracked down the neighbour and told him I was planning to put in an offer, and the kinds of things I would be doing, which included  some much-needed siding repairs, but down the road could include replacing the back deck and maybe a window. I asked if he would be comfortable with my trades using his yard to gain access for that work.

He was very polite but also very definite that he would  not give that permission. In fact, he told me he plans to block the gate altogether to make it clear there is no implied consent to its use.

And he has the absolute right to do so, because there is no right of way or easement requiring him to provide access. If you don’t have that legal obligation, access rests on goodwill alone, and in this case, there is no goodwill, even though I agree with the listing agent that the neighbour seems like a very nice guy.

So, the person who buys this property is going to have a big problem when it comes time to tear out the deck, or replace the windows or roof, or do the siding repairs,  because they will have to bring all their equipment and materials  through the front door to get to the back yard. The front entrance to this unit is very tiny, so forget being able to bring  a ladder through, much less siding, or deck boards. It’s going to be a nightmare.

I was very happy I did my homework, as I won’t be putting in an offer after all, but I wonder how many prospective buyers think to check into things like that when they get caught up in the emotion of multiple offer situations?

A home inspector might have recognized there was an access issue, but most home inspectors don’t talk to the neighbours to find out what kind of goodwill they’ll extend when repairs might be needed. And even if this owner had said “no problem,” the next one might not. If there is not a registered easement or right of way on title, you have no protection and no recourse if access is denied.

Take a good look at access, then,  before you buy. Make sure if there is a gate, that it hasn’t been blocked by an adjacent neighbour. Sometimes easements extend through more than one property; make sure the end unit hasn’t blocked the entry point either.

Be sure, then, to do your due diligence and if you’re not sure, ask your realtor put a clause in the offer giving you and your lawyer enough time to determine whether  access is going to be an issue.  Believe me, I’ll sleep well tonight knowing I dodged a bullet.

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