We have broken an impasse that we were having with one lender who believed a home was worth $50,000 more than we knew it was worth. This happens a lot when they have an inflated appraisal from a refinance. My team has specific techniques to prove to the lender the real market value of a home. Now we should be able to effectively market the home and get an offer. And we are assured that the lender will listen now that the true market value is determined. This is a true success for this family that was trapped in the inflated appraisal that got them in trouble in the first place by overleveraging the home.
This week I’m going to talk about the most common question I get from sellers and Realtors® alike: “What are all of the different stages of foreclosure in Michigan?”
Do you remember the disclaimer in the first newsletter that told you I wasn’t an attorney? Good, because I’m still not one. That said, here’s what I know about the stages and timelines of the foreclosure process.
1) Collections (1 to 90 Days): This usually goes about 90 days before the lender will take the next step. In this stage, your seller will typically be harassed as much as possible by the collections department. After a certain amount of time, the harassment may stop and the lender my attempt a “workout” to get the borrower back on track, if it’s financially feasible and they want to keep the house. Contrary to popular belief, the lender has no obligation whatsoever to offer solutions to the borrower.
2) Pre-foreclosure (14 to 180 Days): This stage starts the moment the lender refers the case to their attorney. Usually 2-4 weeks after the referral, the attorney publishes a notice of the foreclosure sale in a newspaper published in the County the house is in. 99% of foreclosures are conducted this way (foreclosure by advertisement).
3) Foreclosure Sale or “Sheriff Sale”: At the sale, the lender sets an opening bid which is supposed to be the true value of the house. Most of the time, the opening bid is simply the total debt up to that date. 99%+ of the time, the bank “takes the house back” at the sheriff sale because no one outbids them.
4) Redemption Period (30 Days to 12 Months): During this stage, your seller still has the right to occupy the house and the right to sell the house (with or without a short sale). The length of this period can be as short as 30 days if the property is claimed by the lender as abandoned.
It is critical that this does not happen to your client. My team has specific techniques to help ensure this does not happen. Don’t think for one second that just because they are living there that the lender won’t get away with cutting this to 30 days – they try all of the time and you’ve got to stay on top of this or you’ll lose the listing!
As a general rule (if the house is not abandoned), this will be a 6 month period. Michigan’s Governor signed a new law in January, 2007, virtually eliminating the 12 month redemption period. See an attorney or your title company (I recommend Devon Title) to learn more about this.
5) REO (Bank Owned) Department: The borrower no longer has any rights to the property. You no longer have the right to sell it as the borrower has no right to sell it. If they are still living there, they will be taken to court and evicted. Isn’t it sad that they can lose their home to foreclosure without going to court, but they have to be served for a court date to be removed from their home?
I had a chance to talk to a group of homeowners trying to sell their home “For Sale By Owner”. Of course, you know and I know that 85% of them will eventually call a Realtor® for help. Problem is, many of them are trying the FSBO route because they knew they couldn’t afford to pay a Realtor®.
Do you have any listings like this?
Do you have clients that tried the FSBO route first because they owe to much? Give me a call and we can discuss how we can solve this problem for your client while making sure you get paid. Don’t lose the listing and your marketing dollars to a foreclosure.
Now that I’ve covered the stages of foreclosure, next week I’ll discuss when it doesn’t make any sense to even try for a short sale.
Reprint with permission of Great Lakes Home Solututions
L. Scott Ferguson