Once you proceed to redeem a mortgage now
in default, what comes next?
A Power of Sale (POS), as noted in our prior post, is the most efficient
and typically quickest means of resolving the default (aka – recovering your
funds).
·
The mortgagee (lender) has the
right to re-sell the property
·
Property should be listed for sale at fair
market value
·
Independent appraisals should
be obtained (minimum of 2)
·
Document the marketing process
(MLS exposure, ads run, signage etc.)
·
Property is Sold on “AS IS”
basis with no reps. or warranties
·
Negotiate as with any normal
property sale (record all offers/counters)
·
A provision in the sale
agreement allowing the mortgagors (borrowers)
‘the right to
bring the mortgage into good standing’ prior to closing
Although this last point is most often
unlikely, legally you must provide for it within any sale agreement. Your lawyer will likely
recommend that you attach a POS appendix to any agreement, which will not only
address this issue, but also the matter of “no representations/warranties,
AS IS sale etc." This Appendix is a must in re-selling the property and serves to protect your interests with a 3rd party buyer.
On the matter of accounting for all costs associated with a
POS proceeding, make sure you maintain a clear record of what these additional
expenses are. They typically include legal fees and appraisal costs, but also can
involve such other expenses as – property insurance, utility costs,
maintenance/management, carrying costs, etc. Under a properly executed POS, you are
entitled to the recovery of such costs which are above and beyond the mortgage balance
itself.
Best practice is to follow the clear advice
and direction of your lawyer. In addition, seek out experienced commercial brokers in your area, who have an established track record in the marketing of
POS properties.
