Understanding the foreclosure process in the Ontario is an important part of navigating your own home foreclosure.
Before we dive in…
What is power of sale anyway?
Foreclosure is the lengthy, expensive and judicial process of a lender taking title of a property, generally after the borrower stops making payments, and selling that property to recoup as much of the original loan, plus expenses, as possible. In the U.S., lenders have much less fiduciary responsibility and are able to sell at far lower prices.
Power of sale is more common in Ontario. It is the relatively expedited process that lenders use to take back property securing a loan. There is also more fiduciary responsibility for the lender, meaning the lender must be able to show a reasonable effort to sell the property for at least fair market value if not more, or they may be sued by the borrower.
Power of sale is no fun. But just know that it’s not the end of the world.
When you know how power of sale in the Ontario works… it arms you with the knowledge to make sure you navigate it well and come out the other end as well as possible.
The Basic Stages of A Foreclosure
There’s a few stages that are important to any foreclosure process.
Foreclosure works differently in different provinces around the country.
The two ways different provinces use to foreclose upon a property are: judicial sale or power of sale.
In either scenario, foreclosure typically doesn’t go to court until 3-6 months of missed payments have elapsed. Usually (but not always), a lender will send out many notices that you are in arrears – overdue or behind in your payment.
Under Judicial Sale/Foreclosure:
- Your mortgage lender must file suit in the court system.
- You’ll get a letter from the court demanding payment.
- Assuming the loan is valid, you’ll have 30 days to bring payment to court to avoid foreclosure (and sometimes that can be extended).
- If you don’t pay during the payment period, a judgment will be entered and the lender can request the sale of your property – usually through an auction.
- Once the property is sold, the sheriff serves an eviction notice and forces you to immediately vacate the property.
Under Power of Sale (or Non Judicial Foreclosure):
- After 15 days of the first missed payment, the lender serves you with a Notice of Sale and the courts are not required.
- After the established waiting period has elapsed (about 35 days), the lender can have a sheriff evict you and take control of your property.
- The lender can then list your property for sale and must sell for as close to market value as possible.
Anyone who has an interest in the property must be notified during either type of foreclosure.
For example, any contractors or banks with liens against a foreclosed property are entitled to collect from the proceedings of an auction.
What Happens After A Foreclosure?
After a foreclosure is complete, the loan amount is paid off with the sale proceeds.
Sometimes, if the sale of the property isn’t enough to pay off the loan, a deficiency judgment can be issued against the borrower.
A deficiency judgement is where the bank gets a judgement against you, the borrower, for the remaining funds owed to the bank on the loan amount after the foreclosure sale.
Some provinces limit the amount owed in a deficiency judgment to the fair market value of the property at the time of sale, while other provinces will allow the full loan amount to be assessed against the borrower.
Generally, it’s best to avoid foreclosure. Instead, call up the bank, or work with a reputable real estate firm like us at GTA Cash Buyer to help you negotiate discounts off the amount owed to avoid having to carry out a foreclosure.
Experienced investors can help you by negotiating directly with banks to lower the amount you owe in a sale – or even eliminate it, even if your home is worth less than you owe.
If you need to sell a property near GTA, we can help you.
We buy houses in GTA Ontario like yours from people who need to sell fast.
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Other Foreclosure Resources For GTA Ontario HomeOwners: