If you are facing foreclosure in Michigan, you may wonder what happens if your home doesn’t sell after it goes to auction. Understanding the foreclosure process and what happens to your home can help you make smarter decisions on the front end so that you don’t go into financial hardship.
In Michigan, the foreclosure process usually does not go through the courts. Lenders do not have to go to court to take your home. Instead, they follow specific steps set by state law. If your home is not sold at a foreclosure auction, it can lead to different outcomes for you and the lender. Knowing these outcomes can help you make better decisions during this tough time.
This blog will explain Michigan’s foreclosure laws and what happens when a foreclosed home does not sell. You’ll also learn about selling a home in foreclosure and how to stop foreclosure with a cash home sale.
What Is The Foreclosure Process In Michigan?
In Michigan, there are two main types of foreclosure: judicial foreclosure and foreclosure by advertisement. Most foreclosures are done by advertisement because it is faster and cheaper for lenders.
Here are the key steps in the Michigan foreclosure process:
- Missed payments: The process starts when you miss mortgage payments.
- Selling a home in foreclosure: You may try to sell your house for cash or try a short sale before the house forecloses.
- Notice of Default: After 120 days, the lender can send you a notice of default.
- Foreclosure Notice: The lender must publish a notice of sale in local newspapers for four weeks.
- Foreclosure Sale: Your home is sold at a public auction, usually held at the county courthouse.
If your home does not sell at auction, it can create problems for both you and the lender. Keep reading to find out.
What Happens After A Foreclosure Sale?
There are several possibilities if your house does not sell at auction.
Redemption Period
In Michigan, you have a redemption period after the sale. This period allows you to reclaim your property by paying off the full amount owed on your mortgage. If you owe less than one-third of your original loan amount, you have 12 months to redeem. If you owe more than one-third, you typically have six months to redeem. During this time, you can live in your home and even sell it if needed.
No Sale at Auction
If no one buys your home at the auction, it becomes the owned property of the lender. This situation is known as “real estate owned” or REO. The lender will take possession of your property and try to sell it through traditional real estate channels. If they cannot sell it quickly, they may rent it out or let it sit vacant.
Deficiency Judgments
If your home sells for less than what you owe on your mortgage, this creates a deficiency. In Michigan, lenders can pursue deficiency judgments against homeowners like you. A deficiency judgment allows lenders to collect the remaining balance from you. For example, if you owe $200,000 on your mortgage but your home sells for $150,000, you may owe $50,000.
What Are Your Options If Your Facing Foreclosure?
If you are facing foreclosure in Michigan, there are options available where you can learn how to stop foreclosure.
Loss Mitigation Options
You may explore loss mitigation options before or during foreclosure. These options can help keep you in your home or reduce financial loss.
Here are some common loss mitigation options:
- Loan Modification: This changes the terms of your loan to make payments more affordable.
- Repayment Plan: This allows you to catch up on missed payments over time.
Short Sale: You’re selling a home in foreclosure for less than what you owe with lender approval.
Bankruptcy as an Option
Filing for bankruptcy can provide relief from foreclosure. It stops all collection actions and gives you time to reorganize your finances.
- Chapter 7 Bankruptcy: This eliminates unsecured debts but may require selling non-exempt assets.
- Chapter 13 Bankruptcy: This allows you to keep your home while creating a repayment plan over three to five years.
Seeking Legal Help
If you’re facing foreclosure, it’s wise to seek legal help. An attorney who specializes in foreclosure law can guide you through your options and rights. They can help negotiate with lenders for better terms or represent you in court if necessary. They can also assist with filing bankruptcy if that becomes necessary.
Consequences Of Not Selling A Foreclosed Home
If a foreclosed home does not sell at auction, there are consequences for both homeowners and lenders.
For Homeowners
If your home does not sell after foreclosure, you may still owe money on your mortgage due to deficiency judgments. You could also face collection actions from lenders seeking unpaid balances. Your credit score will likely suffer due to foreclosure and any subsequent judgments.
For Lenders
When homes do not sell at auction, your lender takes ownership of properties that may lose value over time. They incur costs related to maintaining and selling these properties. They may also have difficulty recouping their losses if they cannot sell quickly or for an adequate price.
Selling Your Home For Cash
Selling your home for cash can be an effective way to learn how to stop foreclosure. A cash home sale allows you to quickly liquidate your property without going through lengthy processes like traditional sales or auctions. Why Is It Important?
When selling for cash:
- You can receive immediate offers from buyers who have cash ready.
- The sale process is often faster because there are fewer contingencies involved.
- You avoid many costs associated with traditional sales, such as real estate agent fees or repairs needed before listing.
A cash home sale can help you pay off your mortgage balance quickly and avoid further damage to your credit score due to foreclosure proceedings. Selling for cash also gives you more control over your situation. You can negotiate directly with buyers and choose closing dates that work best for you. This flexibility can provide peace of mind during an otherwise stressful time.
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