We have seen an increase in the number of properties being sold under the Power of Sale (“POS”) provisions in a mortgage due to default. If you are considering putting in an Offer on a Property being sold under POS, please be extra vigilant.
Virtually all properties sold under POS include a Schedule “B” which makes it clear that the property is being sold “as is, where is”. This always means that the Buyer must assume all risks and beware of any and all physical defects as well as being saddled with unwanted Title problems such as easements, rights of way and encroachments.
Problems discovered prior to closing which might ordinarily give you a right to require rectification or remedy cannot be complained about in a POS situation, because of the “as is, where is” provisions in the APS and the buyer can be compelled to assume those problems.
The buyer may also be stuck with issues arising from unknown debts which later cause problems for the buyer, such as outstanding public utility accounts that become problematic after closing or equipment contracts such as for furnaces and air conditioning units which may remain unpaid and outstanding and may become the buyer’s burden after closing. It is therefore prudent in POS situations to negotiate a longer than usual “due diligence” condition period so that a full Title Search, utility searches and other Off-Title Searches can be carried out within the Due Diligence Condition period.