When you purchase a home, it is natural to assume that you will be purchasing the home either from another home owner, or from a contractor or developer. However, those are not the only three people or organizations that you can purchase a home from. If a previous homeowner did not pay their mortgage, and the home was foreclosed on, you can also purchase the home from the mortgage lender who previously held the loan on the home.  

Purchasing a home through a mortgage lender is known as a power-of-sale home buying. When it comes to purchasing a home from the mortgage lender, there are a few things you need to know about the process so you know how to approach the process of putting in an offer on the home, and closing on the purchase.  

The Home Has to Be Sold for its Market Value 

Just because the mortgage lender is selling the home doesn't mean you are going to get a great deal on the home. The mortgage lender is obligated by law to sell the home for its market value. That means that you are going to have to pay market value for the home if you want to purchase it. Market value may be less than what a homeowner, with personal connections, would sell the home for, but you still have to pay for what the home is worth when you purchase a home via a power-of-sale property.  

The Home May Not Come with the Appliances 

When the mortgage lender takes over the ownership of the home and sells it via the power-of-sale property arrangement, they only obtain ownership of the home. That generally means that the appliances in the home will not come with the home if the seller purchased the appliances with their own money, not the money from the mortgage itself. When purchasing a home via power-of-sale, be prepared to purchase your own appliances for the home. 

The Home Is "As Is" 

With power-of-sale properties, the home is as-is. You are not going to be able to work with the seller after you have the home inspected and get them to make improvements to the home. The former homeowners, who are essentially being evicted if you don't want tenants, are not going to be motivated to pay to fix up the roof or stop the constantly running water in the toilet when they have to vacate the home. You have to be happy with the home's imperfections and realize that if there is any excessive wear and tear to the home, you will need to fix it up yourself. 

The Sale Could Fall Through 

Finally, keep in mind that the sale could fall through. Check the contract and see if there is a right of redemption clause in the contract. If there is, the homeowner could get the home back if they are able to get their mortgage back in good standing with the mortgage lender before your deal if finalized. Although there is a low chance of this happening, there is a risk, so you need to be aware of it when going through with a power-of-sale purchase. 

A power-of-sale purchase means you are working with a mortgage lender, not the homeowner, to purchase the property. The mortgage lender will be selling the home as-is, it may not come with appliances, and you have to pay market value for the home. Being aware of these risks can help you figure out if a power-of-sale purchase is the right choice for you.