Having your house in foreclosure strikes fear in the hearts of just about all homeowners. Most will do anything they can to avoid facing foreclosure and multiple resources exist to help them. Unfortunately, while getting to the point of foreclosure in Minnesota is relatively rare, it can and does happen.
The good news is that even if you are almost at that point, not all is lost. Avoiding foreclosure in Minnesota is possible if you know the Minnesota foreclosure laws and can use the pre-foreclosure and foreclosure process to your advantage.
The following will provide you with options for addressing foreclosure in Minnesota. It covers the Minnesota foreclosure process, what alternatives exist, whether you should look into an immediate home sale and how to sell a house to avoid foreclosure in Minnesota.
When Does Foreclosure Begin
Technically, a foreclosure process begins when the borrower misses a mortgage payment. Even after just one missed payment, they can be considered as entering into default. Most lenders have internal policies as to when the jump-off point begins, but in most cases, it is shortly after the first missed payment.
Once determined to be in default, the lender will attempt to contact the borrower to work something out. This will usually happen via phone and a letter, but at the very least, the borrower will receive a letter. That letter outlines what default could mean in terms of foreclosure as well as options to recover the mortgage and bring it into good standing.
The Pre-Foreclosure Process
At that point, if the borrower pays the amounts that were missed, they will be returned to good standing. If, however, they miss another month, the bank will reach out again with a notice of default. In most cases, they will still be willing to work out modified monthly payments, even if the homeowner can only make one payment to avoid falling further behind.
The verbiage in the second letter will be more drastic and will specifically threaten to foreclose on the home. The borrower should not ignore the letter or any associated phone calls. Since the 2008 housing crisis
If the borrower misses a third payment, the bank will send a demand letter, also called a Notice to Accelerate, and the borrower has 30 days to work out a modification to their payment schedule or pay off what has fallen behind. If neither is possible, the bank will start the repossession process or start to sell the property via foreclosure.
In Minnesota, once the bank has started to move onto foreclosure, a foreclosure attorney will get the account and the borrower will receive a Pre-Foreclosure Notice. That notice will inform the borrower of the intent of the bank and any options the bank is willing to offer to resolve the situation.
Sheriff’s Sale
The attorney will then arrange a foreclosure sale with the sheriff. This notice must be published in a daily newspaper circulating in the county where that coincides with the property’s location for six consecutive weeks.
All occupants/owners of the property being foreclosed upon have to receive the notice of foreclosure at least four weeks before the foreclosure sale. If the property is a Homestead, the timeframe is eight weeks before the sale.
After six weeks, and four weeks before the Sheriff’s sale, the borrower must be served with a Notice of Sheriff’s Sale. That Notice must contain the date of the sale and time as well as the address of the property. The date on the notice is the date of the sale.
The date of the Sheriff’s sale is the last date that the mortgage can be made current with no other ramifications. The Sheriff may delay the sale if a Notice of Postponement at the same location the sale was originally going to happen.
After-Sale
Once the sale happens, the borrower has six months to pay off the entire Sheriff’s sale amount, plus interest and fees to keep the property. This can happen through three main methods: Go through a real estate agent, work with a third party company that buys homes or you can come up with the money some other way.
MN allows a postponement of the Sheriff’s Sale in return for a shortened redemption period. Once the redemption period has ended, the borrower must vacate or the eviction process begins.
The following applies to the redemption period:
- The standard period for redemption for the borrower is six months
- For qualifying agricultural properties, the redemption period is 12 months
- If the sale was postponed by the homeowner or the property was abandoned, the redemption period is five weeks
- During the redemption period, you maintain the right to stay in the home
Are you Allowed to Sell Your House After Foreclosure Notice is Given
Can I sell my home if it is in foreclosure? Addressing the elephant in the room, the short answer is yes. As long as you sell the house before the Sheriff’s sale. To sell your home to cover the mortgage once your home is in foreclosure, the sale price will need to cover the following as part of the sale:
- The full amount of the mortgage, plus back payments and interest
- Fees associated with the foreclosure costs for the lender
- Fees associated with the foreclosure costs for the Sheriff’s Department
- Closing Costs associated with the sale of your house
If all of that is covered, you can keep any extra proceeds from the sale.
You cannot sell the home after the Sheriff’s sale, even if no one purchases it at the auction. At that point, you technically do not own the home. You do have the redemption period.
Can You Stop a Foreclosure Process Once It Has Begun?
You can stop a foreclosure at any time up until the Sheriff’s sale or foreclosure auction. There are several ways to do that, including, if the bank is willing, restructuring your mortgage to get back into good standing.
The key is to start early. Here are a few of the options that will be open to you.
Fix Your Finances
There is a chance you can renegotiate your loan and avoid the foreclosure proceedings, but you will need to show your lender that you have addressed whatever the situation was that led you to default. Fixing your finances includes covering the past due payments on your mortgage and resuming payment terms. To do that, you may have to:
- Get another job
- Liquidate assets
- Implement a mortgage protection policy
- Borrow money from a third source
- Rent a room or the entire house to earn supplemental income
None of these approaches are ideal, but all can lead you back into good standing with your lender.
Sell Your Home
If those alternatives will not work, selling your house for cash is another alternative up until the auction or Sheriff’s sale.
There are multiple companies that buy houses in Minnesota and working with one means you can sell your house without a realtor or associated fees.
You can go through a realtor. Often, though, finding cash home buyers in Minneapolis is quicker and simpler.
Negotiate With Your Lender
Banks do not want to own a house. It is expensive, a lot can go wrong and an auction or Sheriff’s sale rarely covers the entire mortgage. Those realities make most banks willing to negotiate some solution to your financial crisis. Options can include:
Forbearance
A forbearance is a postponement of payments to help you get through a financial situation and can include deferring payments to the back end of your mortgage and implementing a repayment plan. This arrangement will not affect your immediate credit score or long-term credit report.
Loan Modification
A bank renegotiation can result in a loan modification and the altering of the terms of your mortgage, including the interest rate, allowing you to regain your current status with the loan and have more affordable payment options. It is essentially a refinance of your existing mortgage.
If you are a first-time buyer, you may also have other government programs available to you and should look into FHA and HUD programs at least.
Deed-in-Lieu-of-Foreclosure
A Deed-in-Lieu-of-Foreclosure is an agreement where you voluntarily give up the home to your mortgage lender but avoid foreclosure. Some banks and third-party mortgage companies will even make a cash offer to get you out without the hassle of foreclosure.
Short Sale
A short sale is when a bank approves you selling the house for less than the mortgage, usually at housing market value because it determines it will not get back the mortgage cost at auction and letting you sell it is less expensive.
Bankruptcy
Bankruptcy is never preferred but is an option if you qualify for it.
How to Sell a Home in Foreclosure
Up until the Sheriff foreclosure sale, selling a house to avoid foreclosure is an option.
To sell your home, contact a realtor with experience selling a house in foreclosure or work with a company where you can sell your house without a realtor.
You can sell your home yourself, but because you have to cover the mortgage and any fees as well as interest, you should use one of the two options above.
How Long Does it Take to Sell a Home in Foreclosure
How long it takes to sell your home depends on several variables:
- The state of your home
- Buyer qualification (down payment, credit review, etc.)
- Whether you sell to a company that buys homes or sell the house on the open market
- The local real estate environment
- The size of your mortgage debt and associated fees and interest
The quickest option is to find a company that will buy your home from you.
Final Thoughts
Foreclosure in Minnesota is never a fun process, but you have options to sell your home before an auction and after, through Minnesota home redemption laws. The key is to figure out what works best: Get current on your mortgage, find a company to buy your home, or redeem it.