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Can I Sell a House In Foreclosure Michigan
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Your Guide to Selling Your Michigan Home Before Auction
Rainy days can hit any phase of life. Facing foreclosure of a property is very stressful phase, especially when you are facing long term financial hardship due to job loss, huge medical bills, or divorce. During the foreclosure process, most People don’t know they can sell their property before it goes to auction. Even after auction, property can be purchased back within the 10 days of redeem period which is more difficult and more expensive option. Thats why, it is always better to sell before auction to a cash buyer. But lender should be informed that homeowner has a legitimate offer and willing for closing as soon as possible. Selling a property by owner in foreclosure is better option as opposed to letting the bank sell it in an auction. In this guide, we’ll walk you through the steps to ensure a successful sale and highlight the benefits of selling by owner before auction sale. Keep reading to learn more and make informed decisions!
What is Foreclosure ?
Foreclosure, a legal procedure typically initiated by a lender like a bank, involves reclaiming a property from a borrower who has defaulted on mortgage payments. In Michigan, foreclosures occur via judicial or non-judicial means, necessitating swift action and open communication with lenders to explore viable alternatives and prevent foreclosure.
Once a house is foreclosed, the lender then sells the property to recover the losses. There are number of consequences a home owner can face.
including:
- Credit Score Damage: It would be very difficult to get a new house and secure a new loan If property is lost in auction.
- Home Eviction: The most difficult impact of foreclosure is the loss of a home. It means you may have to start from scratch, including any equity you had already build over the years.
- Deficiency Balance: When the proceeds of the foreclosure aren’t enough to pay the entire mortgage , there would be a deficiency balance. The lender may sue you in order to collect this remaining balance.
Navigating the Foreclosure Process in Michigan
In Michigan, the foreclosure process moves swiftly, typically initiated by a notice of default from the lender, leading to a property auction. The entire process take as little as six months, swift action and proactive measures are crucial to prevent foreclosure.
Phase 01.
First Missed Payment
When a homeowner misses the first payment, the homeowner is given grace period of 15 days. If the homeowner fails to pay within the given time period, homeowner will pay an additional late fee. Lenders may also report the delay in payment to related credit bureaus.
Phase 02.
Notice of Intent
A Notice of Intent to foreclose is the first step in the foreclosure process issued by the lender. This is the first notice required by the Michigan Fair Foreclosure Act and must be sent to a borrower at least 30 days before the lender can file a foreclosure complain. If the property owner does not receive a Notice of Intent (NOI) to foreclose by the lender, it can be challenged in the court as the lender has failed to comply with the foreclosure procedural requirements.
One of the first and most important things is, always answer the initial notice of intent(NOI). The worst thing you can do is, not answering the (NOI) in the initial foreclosure process.
By not answering the NOI you are essentially forfeiting your rights to fight against the foreclosure. All homeowners have certain rights that allow to fight against foreclosure to potentially save your home. That’s why, always answer the NOI. if you don’t answer the NOI, your home goes straight into foreclosure to recover the loan money by selling the property by your lender as long as six months.
Phase 03.
Notice of Default or Foreclosure Lawsuit
After continuously missing three mortgage payments, the lender will issue a Notice of Default and begin foreclosure proceedings. There are two types of foreclosure process. It can either be judicial or non-judicial.
A judicial foreclosure process takes place in the state’s court system because the mortgage agreement doesn’t have a “power of sale.” Meanwhile, a non-judicial foreclosure process gives the lender the power to foreclose a property without a court legal process.
If the foreclosure is non-judicial, the homeowner will receive a Notice of Default (NOD) which states how much amount need to be paid including the principal amount, interest, late fees, and even foreclosure fees. After issuing the (NOD), the homeowner will have 90 days to repay the outstanding payments.
If the amount cannot be paid, the homeowner can ask the lender for a new repayment agreement or loan remodification plan.
On the other hand, judicial foreclosure, a foreclosure lawsuit is filed by the lender in the court. The Michigan homeowner must respond to this notice by the court immediately otherwise the judge will grant a default judgment in favor of the lender.
Once a response has been made to the court default notice the case would go to trial and the homeowner not only gain enough time to seek legal advice but it can also open multiple options to avoid foreclosure by either arrange money themselves or by selling to a cash buyer.
Phase 04.
Pre-Foreclosure
The time between the issuance of a Notice of Default and the house’s foreclosure auction is called pre-foreclosure.
During this period, the homeowner can pay what is owed or talk to the lender about a possible relief plan or loan modification to avoid foreclosure.
If the homeowner doesn’t have enough money to pay or the lender does not approve a new repayment agreement, the best alternative is selling the property. In fact, selling the house during this period is highly favorable for the property owner.
Phase 05.
Notice of Sale
When the homeowner fails to pay what is owed during the pre-foreclosure duration, the lender will publish a Notice of auction sale in the local newspaper. It can take two to three months for auction sale from the day of Notice of sale.
The homeowner can still sell the property during this period, but it is better to sell without any delay.
Phase 06.
Eviction from Home
If the property is auctioned, the property owner will be issued an order to leave the house and all the occupants of the property would be given a few days to vacate the property.
If they refuse to leave the property then a lender would file a motion in the County court and the local Michigan authority or sheriff will have to ask the occupants to leave the property by force if needed and impound their belongings.
Can You Sell a House in Foreclosure Michigan?
Yes, You can sell your house in foreclosure in Michigan, but its a complex process and you are bound by limited time and choice to sell before auction sale if other options don’t work to avoid foreclosure.
Selling a house before auction sale has many advantages, as followed:
- Your credit history will not have a foreclosure record which is the worse thing to a credit report. A foreclosure stays on your credit record for upto seven years. That means you will face huge difficulty while securing a new line of credit and any type of loans specially if you need money for a medical procedure.
- You can buy another house sooner after avoiding foreclosure on your credit history . If you have a foreclosure on your credit history, it would be very difficult to secure a new mortgage. Selling a property to a cash buyer would allow you to buy new house sooner.
- You won’t be have any deficiency balance. Supposed, if the proceeds of the property couldn’t cover the mortgage and other fees, the bank would ask you to pay for a deficiency balance. But If you sell your home before the auction , you’ll get enough money to pay off the mortgage balance. Otherwise, lender may sue you to recover the deficient balance.
Timeframe for Selling Your Home Before Losing in Foreclosure in Michigan
There is no exact time before you lose your property in the state of Michigan to foreclosure because it depends on several factors such as who is the lender, the type of foreclosure process whether judicial or non-judicial and Michigan specific rules.
By and Large, In most cases, it can takes six months to 12 months to complete the foreclosure process.
Timeline for Selling a House in Foreclosure in Michigan
How long it takes to sell a home in foreclosure is similar to the timeline of selling a typical Michigan property. If the real estate market is hot, homeowners can sell their property in a few months or less.
However, you have to remember that the timeline of selling a property is affected by several factors, not just the real estate market in your area.
The state of your property, the neighborhood, the skills of the real estate agent who’s helping you, etc., can also significantly impact the sale.
Nevertheless, here’s what to expect from the process with an agent: determine your home’s fair market value, set a price, market the house, negotiate an offer, and close the deal.
The only difference is that when you sell your house in foreclosure, you have to notify your lender that you are selling it and that you actually have an offer. You must prove this to show your lender you are not just delaying foreclosure.
Timeline for selling a foreclosure house depends on many factors such as:
01.
Phase
Phase of the real estate market is a big factor. If market is hot, house can be sold in fews weeks to 3 months.
02.
State of the Property
If a house is in good condition and does not required major repair, can be sell faster in contrast to that required major repair.
03.
Neighborhood
Neighborhood of the property where it is lacated, play a big role when its come to selling and appraisal.
04.
Agent’s Network
Real estate agent’s skills and circle of investor also play a major role in the timeline of a foreclosure property.
However, you have to keep in mind that the timeline of a foreclosure property is depend on the type of lender and sheriff’s sale process compared to the non-foreclosure property. Moreover, when you are selling a house in foreclosure, you have to notify your lender that you are actively selling it and you have an offer. And you must prove this to your lender that you are not just delaying foreclosure.
Navigating the Home Selling Process in Foreclosure in Michigan
Initiate the process by engaging with your lender to explore solutions and alternatives, emphasizing a pre-foreclosure sale. Negotiate terms and settle missed mortgage payments, guided by professional advice. Upon successful pre-foreclosure sale, the traditional selling process ensues. However, unsuccessful pre-foreclosure may lead to property auction, necessitating swift action and thorough consideration of options. Overall, selling a house in foreclosure in Michigan demands effective communication, exhaustive exploration of options, and professional guidance.
01. Assess property value
First and foremost thing in house selling process is to assess your home value which will give the idea at what price level to negotiate with the buyer. There are many online tools can be used to determine the price or asking for the help of a real estate agent would be ideal But there are many factors take into account like the overall quality and condition of the property, square footage, local property values, home features, and market conditions of a house sold in your neighborhood in last 6 months.
02. Determine the asking price
Determining the asking price of a foreclosure house depends on many factors. But in order to profit you must calculate that the price covers your unpaid mortgage payments, interest, and late fees. There are also the fees associated with selling a property like house repairs, agent commissions, and closing fees, etc.
03. Notify the Mortgage Lender
YOU must notify your lender that you are willing to sell the property and you’re already in the process of finding a buyer. Most of the time, lenders support the property owner to sell their property before auction because its takes much less effort, time and resources to recover the money.
04. Choose Representation
Once you notify the lender, you must seek the help of an agent who has the network of cash buyers to put the property under contract as soon as possible because of tight timeline.
05. Get an Offer and Negotiate
When your property is facing foreclosure and tight timeline, there is not much room for long negotiation to earn more money on sale. By selling, you are not only Saving your credit but also time by avoiding auction sale. Do not wait to reach out to companies that buy houses for cash. Get cash offers from reliable home buyers.
06. Inform the Lender about a potential Buyer
Once a cash buyer is secured, notify the lender about the progress of the sale to avoid the foreclosure. If the home has a legitimate offer, foreclosure will not progress as cash offer is a win-win offer for all parties. Banks usually don’t like to go through the auction process because its required a lot efforts, time, and resources.
07. Finalized the property Deal
Once you closed the property deal with the buyer. Informed the lender that house is sold, and pay the owed amount through a escrow company.
NOTE:
You may walk away with extra cash after paying the owed amount to bank if you start looking for offers sooner rather than later by avoiding accumulating interest and fees.
Navigating Challenges in Selling a House in Foreclosure in Michigan
There are many factors that can create challenges in selling a foreclosure house, As follows:
Absentee Owner Situation
In cases where the owner is residing in the other state, it can be challenging to arrange showings for inspection and estimate the repair.
Additionally, If the owner is inheriting a property facing foreclosure, it can have many challenges depending on the probate process in your state. You may need to speak with multiple attorneys who can assist with legal matters related to both foreclosure and probate. So time is the key to cash the possible equity.
Litigation Issues
A foreclosure house can be tied to several types of legal litigations including foreclosure proceedings, deficient balance, improper foreclosure notice which we have discussed above. But other significant litigations are as follows:
Bankruptcy Proceedings
The property owner may file for Chapter 7 bankruptcy to delay or avoid foreclosure which can only temporarily stop the foreclosure process. This will delay the selling process temporarily but also increase the unpaid balance by recurring interest and late fees, thinning your profit on sale.
Eviction Motion
After the sale of a foreclosure property, the new property owner may need to file an eviction motion to remove any occupants who refuse to leave the property, such as tenants and the homeowner.
Title Disputes
The selling of a foreclosure house may be halted by title disputes if there are claims from other creditors and liens on the property.
Independent Seller Scenario
Homeowners should not sell houses tied to foreclosure by themselves unless they are real estate agents themselves. Selling a house alone during foreclosure increases the possibility of leading to auction because it is a complex process requiring extensive legal and real estate expertise.
Alternative Solutions Beyond Selling a Home in Foreclosure
Catching Up on Missed Payments: Consider catching up on missed payments to potentially evade foreclosure and retain ownership of the property.
Loan Modification: Exploring loan modification with the lender offers an avenue to adjust loan terms, potentially averting foreclosure.
Pre-Foreclosure Refinancing: Initiating loan refinancing prior to foreclosure can serve as a preventive measure against property loss.
Deed in Lieu of Foreclosure: Opting for a deed in lieu of foreclosure entails voluntarily transferring property ownership to the lender, serving as an alternative to foreclosure proceedings.
Short Sale Option: A short sale involves the lender agreeing to sell the property for less than the remaining mortgage balance. This may suit individuals struggling with payments and unable to secure a buyer to cover the outstanding balance. Professional assistance and transparent communication with the lender are imperative. Understand the potential credit and tax implications, and brace for a potentially protracted process.
Common Queries About Foreclosure
Yes, you can sell your house if it’s in foreclosure in Michigan. Often, this is the best way to get out of foreclosure and avoid significant impacts to your credit history.
Yes, selling a property during pre-foreclosure is feasible. Negotiating with the lender and informing them about potential buyers is crucial.
A Notice of Intent to foreclose is the first step in the foreclosure process issued by the lender. This is the first notice required by the Michigan Fair Foreclosure Act and must be sent to a borrower at least 30 days before the lender can file a foreclosure complain.
If the property owner does not receive a Notice of Intent (NOI) to foreclose by the lender then it can be challenged in the court as the lender has failed to comply with the foreclosure procedural requirements.
Short sales typically occur when a homeowner sells their property for an amount less than the outstanding mortgage balance, with the lender's approval. It is often pursued as an alternative to foreclosure when the homeowner is unable to keep up with mortgage payments.
A foreclosure typically stays on a credit reports for unto seven years from the date of the first missed payment.
Filling bankruptcy can temporarily stop the foreclosure process but can’t be avoided without right solutions.
Yes, Homeowners have the right to two adjournments, Each adjournment is for up to 30 days.
Below is a list of states across the U.S. where we actively purchase houses
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