Anonymised, illustrative composite. A buyer read a power-of-sale condo's below-market price as a flat discount — the lender's agreement left the arrears, and the verification, entirely up to the buyer.
At a glance
An agent's buyer client found a one-bedroom condo listed at $410,000 in a building where comparable resale units had recently sold for $460,000–$465,000. The listing was a power of sale — the lender enforcing a defaulted first mortgage, not the registered owner, was the party selling. The buyer read the gap as a straightforward $50,000 discount and wanted to move fast.
A power of sale agreement is not a normal resale contract. Ontario lenders use it as the remedy they use instead of foreclosure, and the agreement they draft reflects that: a schedule that deletes most of the standard clauses, the property sold “as is, where is,” no title covenants and no representations from the lender, and a clause letting the lender terminate outright if the borrower redeems the mortgage or files for bankruptcy before closing. If the deal collapses for any of those reasons, the buyer's deposit is “returned, usually without interest, and expressly your only remedy” — there is no lender to sue for the lost bargain.
The agreement being rewritten in the lender's favour also means the buyer, not the lender, has to independently confirm the things a normal seller's disclosures would otherwise cover: which mortgage is actually being enforced (checked against the parcel register), whether property tax arrears exist, and — because this was a condo — whether common-expense arrears exist. Common-expense arrears matter specifically because they “can rank ahead of the mortgage and become yours” on closing, regardless of what the purchase price says.
The buyer's lawyer ordered a status certificate as part of the conditions. Ontario condo corporations must respond within a strict window — the Condominium Authority of Ontario confirms a corporation must provide it within 10 days, for a fee capped at $100 including tax — and this one disclosed $11,400 in unpaid common expenses attached to the unit. That figure does not show up in the purchase price and the lender's agreement offered no representation about it either way — it is simply a debt that travels with the unit.
The math the buyer's agent walked the client through: $460,000 comparable market value minus the $410,000 power-of-sale price is a $50,000 apparent discount. Subtracting the $11,400 in inherited arrears brings the real advantage down to $38,600 — still a genuine deal, but almost $12,000 smaller than the headline number suggested, and with no seller on the other side to negotiate a price adjustment against. The buyer's deposit on the $410,000 purchase was $20,500 (5%), held on the lender's rewritten terms rather than a standard trust arrangement — a much thinner protection than the ordinary rule that a buyer's deposit sits in trust and isn't forfeited automatically even on a buyer default.
Had the buyer skipped the status-certificate condition and closed on the strength of the headline discount alone, the $11,400 in arrears would not have disappeared — it would simply have surfaced after closing, as a debt already attached to a unit the buyer now owned outright, with no lender or seller left on the file to negotiate against. The $100 fee and the ten-day wait for the certificate are trivial next to that outcome, which is exactly why the condition belongs in every power-of-sale condo offer, not just the ones that look complicated.
There is nothing irregular about any of this — it is simply how a power-of-sale agreement is structured. The lender sells title free of the interests ranking behind the mortgage being enforced (second mortgages, later liens, later executions), but a prior charge, prior easements and restrictive covenants, and municipal tax arrears all stay with the property, and nobody guarantees vacant possession or the accuracy of anything in the listing. The buyer's own verification work is what stands in for the disclosures a normal seller would make.
The buyer closed, aware of the $11,400 arrears going in rather than discovering it after taking title, and budgeted for it as part of the true purchase cost. The deal still cleared roughly $38,600 under comparable market value, which is why the buyer proceeded — but the client's working assumption walking in (a flat $50,000 discount, no further diligence needed) was the part that needed correcting before an offer went in, not after.
The tell here was structural, not hidden: any power-of-sale listing that reads as unusually cheap against recent comparables should be treated as a starting number, not a final one, until the parcel register, tax arrears and (for a condo) the status certificate have all been independently checked. The lender's own agreement will not flag any of it.
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