Across the country, commercial and residential real estate has generally been strong. The strength of the real estate market is reflected in the fact that, according to the real estate database ATTOM Data Solutions, the number of foreclosures nationwide fell to its lowest level in 13 years in 2018.
However, the same data showed that in Michigan, the foreclosure rate increased 15 percent last year. While today’s numbers are a far cry from the foreclosure frenzy that took place during the depths of the “Great Recession,” foreclosure is a pervasive reality (and, in Michigan, a growing reality).
Foreclosure is a remedy that allows a lender or other lien holder to collect a debt, secured by real estate, owed by a borrower who defaults on their loan obligations. The process often leads to a foreclosure sale involving a property being auctioned off.
A foreclosure sale can result from the exercise by a party of its rights under a number of different underlying instruments, including a building lien, mortgage, land contract, condominium lien, or condominium lien. writ of execution. Foreclosure is an important and quite complex legal process.
There are two types of foreclosures in Michigan:
- Judicial foreclosure, which is governed by MCL §600.3100; and
- Foreclosure by advertisement, which is governed by MCL §600.3201.
In both processes, there are specific deadlines that must be respected by the parties involved. In addition, there are a number of actions, as well as restrictions on actions, that the foreclosure law imposes. This article will summarize the judicial foreclosure process in general and address some of the most important questions buyers of foreclosed properties should keep in mind to protect their interests.
What form of deed will I receive when purchasing foreclosed property?
In Michigan, as in most states, foreclosure sales are called “sheriff’s sales” because county sheriffs are responsible for conducting public auctions of foreclosed properties. Sheriff’s sales typically take place on a weekly basis, are open to the public, and typically take place at the county courthouse or other county building.
A list of the auctioned goods is made available to potential bidders before the sale. The sheriff or his representative is auctioning off one property at a time, and anyone can bid. The starting auction is usually the initial “credit” offer from the foreclosure instigator, which is submitted to the auctioneer in advance. When a property is purchased at auction, the buyer receives a “sheriff’s deed”.
What steps do I need to take after the sheriff’s sale to register the deed?
In a judicial foreclosure, a sheriff’s deed must contain a number of details, including the names of the parties to the action, the date of the land contract or mortgage, and the amount for which each parcel of land described in the ‘deed has been sold. Michigan law requires that a deed of sale be filed, with the registry of deeds for the county in which the property is located, within 20 days of the sale (although the Michigan Supreme Court has made an exception to this requirement. time limit in cases where the previous buyer made no attempt to redeem the property and was not harmed by the late filing).
A county deed register is not required to determine the amount needed for the redemption. Instead, the buyer must also provide the registry with an affidavit with the sheriff’s deed to be recorded that states both:
- (1) the exact amount required to buy back the asset, including daily daily allowances; and
- (2) the date on which the property is to be redeemed as indicated on the auctioneer’s certificate.
Will I own the freehold property after the sheriff’s sale?
Unlike typical deeds, a sheriff’s deed is subject to a repayment period, which allows the defaulting party (under a mortgage or other instrument) a period of time to remedy its default. . In the event of redemption, the property reverts to the previous owner. If not redeemed on time, ownership of the property immediately reverts to the purchaser holding the sheriff’s deed.
The date of the sheriff’s sale triggers the start of the property buyback period. In most cases, the repayment period is six months. In less common scenarios, such as when the amount claimed for a foreclosed mortgage is less than ⅔ of the original debt, or when it is a farm property, the period can be up to 12 months. In contrast, properties that turn out to be abandoned only have a one-month repayment term. Either way, if you buy a property during foreclosure, there will be a waiting period before you freely own the property. During the buyback period linked to a judicial foreclosure, the parties eligible for the buyback of a property are:
- The mortgagor (i.e. the borrower of a mortgage, who is usually a landlord), the heirs or personal representative of the mortgagor, or anyone who has a registered interest in the property legally claiming the mortgage. mortgagor or under it or the heirs or personal representative of the mortgagor;
- The seller (i.e. the buyer or purchaser) of a land contract, the heirs or personal representative of the seller, or any person legally claiming from or under the seller or the heirs or personal representative of the seller ; and
- A junior mortgagee.
What happens if I incur expenses related to a property that is bought back?
Anyone seeking to redeem the property must, within the applicable redemption period, pay either to the purchaser directly or through the registry of deeds the amount of the winning bid on the sheriff’s sale, with interest to begin. from the date of sale at the interest rate provided for by the mortgage or land contract. A court may also require the payment of certain fees, such as taxes, insurance, and deed registration fees, incurred after the sale and before the redemption, to be added to the amount owed to redeem the property. To claim reimbursement for these expenses, the purchaser of the property must file an affidavit, with supporting documents, with the registry of deeds. Foreclosure laws also provide procedures for the buyer to inspect the foreclosed property during the redemption period.
There are advantages to buying a foreclosed property, the main one being the ability to get a property for less than actual market value. However, such transactions are not without risks. Buyers must adhere to strict legal requirements for registering a sheriff’s deed, and they must wait for redemption periods before they can be assured that they will own the property free of charge.