The Foreclosure Process In Michigan
TYPICAL PROCESS: When someone is behind on their payments by 3 months, the bank will file a Les Pendes with the County Courthouse. It's basically notice to any and all individuals that the bank COULD foreclose upon the property. Anyone can go to the courthouse and look for the Les Pendes. The next step is for the bank to publish in the local newspaper that they intend to foreclose. They do this 4 weeks straight. The publication is located in the legal notice section of the classified ads. It states who owns the property and what is owed to the bank. It also states that the property will be auctioned at the courthouse steps on a certain date after the publications are done. This is the sheriff's sale. If there is not a bidder at the sheriff's sale, the bank will bid the amount they have calculated to cover the outstanding mortgage and all fees. In Michigan, residential property can be bought back by the owner for 6 months after a sherrif's sale. After that 6 month period the bank is the legal and sole owner and typically lists the property for sale with a realtor.
PREFORECLOSURE SHORT SALE: Quite often individuals will try to sell their properties prior to being forclosed upon. However, with the 0 down mortgages many individuals do not have any equity built into their property to cover the costs associated with the sale or the downward turn in the market. Instead, sellers will need to contact the "Risk Assesment" department to find out what the bank would be willing to accept for a pay off of the mortgage. This is a different department than "Collections" which will probably not give you any assistance. Utilizing the help of an experienced Realtor is very helpful. Typically any leins are removed through the title process.
SHERIFF'S SALE: The bank will bid on the property the amount due for the mortgage and every fee they can think of. Anyone else is welcome to bid on the property. However, they are buying the property that day, there is not time to arrange financing with any leins associated to it (IRS, Second Mortgage, etc). Most often, the bank is the winner in the auction.
REDEMPTION PERIOD SALE: After the Sherrif Sale the bank will wait the manditory period the original owners had to redeem the property. Those original owners can sell the property themselves up until the deadline of the redemtion period by utilizing a short sale.
REAL ESTATE OWNED (REO) SALE: After the redemtion period has passed the property comes under sole ownership of the bank. They pay off any and all leins and put the property up for sale. These properties will be listed in the MLS by an agent who specializes in representing the bank. (These agents pay higher insurance premiums for their errors and ommissions insurance). This is typically when most people look at buying a foreclosure.