Power of sale is the main way lenders in Ontario recover a mortgage after a borrower defaults. For investors, these properties can be a source of below-retail deals. But the process is widely misunderstood, and the public listings you see are rarely where the real margin is. Here is how power of sale works in Ontario, what to check before you buy, and where investors actually find the best deals.
What power of sale means in Ontario
Ontario is a power of sale province. Most of the rest of Canada uses judicial foreclosure, where a lender has to go through the courts to take and sell a property. Power of sale is different. In most cases the lender does not need a court order. That makes it faster than foreclosure, which is why Ontario lenders use it.
The key thing to understand is what the lender wants. The lender is not trying to keep the house. They want their money back. They sell the property, take what they are owed, and any surplus goes to the borrower. The lender also has a legal duty of good faith. They must take reasonable steps to get fair market value. So a bank power of sale listed on MLS is usually not a fire sale. The discount is often thinner than investors expect.
The power of sale timeline, step by step
The process runs on a set schedule under the Mortgages Act. Knowing the stages tells you where the opportunity is.
- Default. The borrower misses payments. Under the mortgage terms the lender can usually start the process after the default period, often 15 days after default.
- Notice of Sale. The lender serves a notice on the borrower and other interested parties, such as second mortgage holders. It states the amount owed and warns that the property will be sold.
- Redemption period. The borrower gets at least 35 days from the notice, or 40 days where a spouse has rights, to pay the arrears and costs and stop the sale. This is their equity of redemption.
- Sale. Once the redemption period passes without payment, the lender lists and sells the property, usually on MLS through an agent.
- Payout. Proceeds cover the lender’s costs and debt first, then other registered charges, and any surplus goes back to the borrower.
That redemption window is the important part for investors. During those weeks the owner still controls the property, and many of them would rather sell fast and clean than watch the clock run out. That is the off-market window, and it closes the moment the property hits the public market.
Where investors actually find these deals
There are two ways into a power of sale property, and they are not equal.
The first is on-market. You wait until the lender lists the property publicly, then you make an offer like everyone else. These are easy to find. The problem is that they are competitive, and the lender’s duty to get fair market value caps the discount. You are bidding against every other investor watching the same listings.
The second is off-market. You reach the owner while they are in default, before the property is ever listed. An owner facing a Notice of Sale often wants a fast, firm, cash offer so they can move on with some equity intact. There is no bidding war because you are usually the only buyer at the table. This is where wholesale assignments and true off-market deals come from, and it is where the real margin lives.
What to check before you buy a power of sale property
Power of sale purchases come with terms that favour the lender. Go in with your eyes open.
- As-is, no warranties. Lenders sell power of sale properties as-is. The agreement usually strips the standard representations and warranties. You get no guarantee on condition, and no promises about what you find inside.
- Limited access. You may not get a full look through the property before closing. Occupants may still be living there.
- Title and liens. Run a title search. Power of sale can clear junior interests, but you want to know exactly what is registered against the property.
- Vacant possession. Confirm whether you are getting the property empty or with tenants or owners still in place. This changes your timeline and your costs.
The theme across all of this is due diligence. Verify the condition, the numbers, and the title yourself. Do not rely on the seller’s word. This is true for any distressed or off-market deal, whether it is a power of sale, a fixer upper, or a wholesale assignment.
Why the biggest margins are off-market
On MLS you are one of many buyers, and the lender is legally pushing for full value. Off-market you are often the only offer, working directly with a motivated owner before the property is exposed to the market. That is the difference between a thin retail spread and a deal with real room in it.
Jania Group works the off-market side across Ontario. We are investors and buyers, not agents or a brokerage. We find distressed and off-market properties, put them under contract, and pass them to buyers on our list. If you invest in off-market properties across Ontario, from Toronto and Ottawa to Hamilton and beyond, we can send deals that fit your box.
Want the full picture on buying below retail? Read our guide on how to buy off-market investment properties in Canada.
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The investors who win these deals are the ones on a buyer list before the property is ever listed. Tell us the markets you buy in and the kind of deals you want, whether that is fixer uppers, buy-and-hold rentals, BRRRR, or wholesale assignments. When something fits, you hear about it first.
This article is general information for investors and is not legal advice. The power of sale process is governed by the Mortgages Act and can vary by situation. Confirm the details and your obligations with a licensed Ontario real estate lawyer before you buy.