Why procure a power of sale appraisal?

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Why procure a power of
Sale appraisal?
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In Ontario, Power of Sale is a legal procedure
that occurs when a mortgage lender can sell a
property when the borrower defaults on their
mortgage payments or breaches the mortgage terms.
Its important to note that the Power of Sale is
different from foreclosure, which involves the
lender taking ownership of the property.
Foreclosure and power of sale are two different
legal processes that lenders can use to reclaim
property when borrowers default on their mortgage
payments. While both processes result in the sale
of the property to recover the debt owed, there
are significant differences between them,
including the legal procedures involved and the
rights of the borrower. Foreclosure is a
court-supervised process initiated when a lender
files a statement of claim in court. The borrower
has the right to defend against the foreclosure
action, but if the court grants the foreclosure
order, the property is sold through a
court-approved sale. Earnings from the sale are
used to pay off the outstanding mortgage debt,
and any surplus is returned to the borrower.
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When a Power of sale clause is included in a
mortgage contract, this allows a lender to sell a
property without court involvement. The process
begins when the borrower fails to meet the terms
of the mortgage agreement either by failing to
make one or more mortgage payments, or there is a
breach of a convent in the mortgage agreement.
This includes failure to insure the property,
failure to pay realty taxes, purposefully
damaging the property or using the property for
an illegal use. The lender must notify the
borrower in writing with a Notice of Sale and
provide an opportunity to resolve the default.
This notice informs the borrower that the lender
intends to sell the property to recover the
outstanding debt if the borrower is unable to pay
off the debts in a specified period (usually 35
days). If the borrower fails to pay off their
debts, the lender can proceed with the sale of
the property through a real estate agent or
public auction. The income from the sale is used
to pay off the outstanding mortgage debt, with
any surplus returned to the borrower.
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Why Procure a Power of Sale Appraisal?
Lenders should involve an accredited appraiser to
complete a formal and thorough appraisal of the
property being sold. Having a formal power of
sale appraisal is crucial for multiple
reasons Determining Fair Market Value A power
of sale appraisal provides an unbiased estimate
of the propertys fair market value. This
valuation helps ensure that the property is
priced accurately, maximizing the likelihood of
selling it for a fair price, avoiding the risk of
undervaluing or overvaluing the property, which
can affect the sale process and the lenders
ability to recover the outstanding debt.
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Compliance with Legal Requirements In Ontario,
lenders are required to obtain a current power of
sale appraisal of the property before proceeding
with a Power of Sale. This ensures that the sale
is adhering to legal standards, protecting the
interests of both the lender and the
borrower. Demonstrating Due Diligence Obtaining
a power of sale appraisal demonstrates that the
lender has conducted proper due diligence to
determining the propertys value before selling
it. This can help protect the lender from
allegations of unfair practices or negligence and
help to ensure transparency and reassurance to
potential buyers.
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Negotiating Power A power of sale appraisal
gives the lender leverage during negotiations
with potential buyers, providing a solid and
defendable justification for the asking
price. Minimizing Risk A power of sale appraisal
helps minimize the risk of financial loss for
both the lender and the borrower. By accurately
assessing the propertys value, the lender can
ensure that the income of the sale is sufficient
to cover the outstanding debt and any associated
costs. For the borrower, knowing that the
property is being sold at a fair market value can
provide reassurance that they are not being
unfairly disadvantaged in the Power of Sale
process.
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