What is Foreclosure?

What is foreclosure?  This seems to be one of the top questions I have to answer on almost a daily basis.  It's no surprise because it is such a confusing topic to the general public.  A short sale is a part of the foreclosures process but not a foreclosure.  Still confused, I don't blame you.  Let's put the idea of a short sale aside for now and just go over what a foreclosure is.

Foreclosure is a legal way for a lender to take back their right to a property from a home owner who is not paying their mortgage.  It is a pretty straight foreword process but it can be very long and frustrating as well.  It starts with the bank send the home owner a number of letters asking them to pay their mortgage that they have fallen behind on.  The letters start coming about 60 days after your first late payment.  From there the bank may call the home owner and try to work with them by having them apply for a loan modification.  That is a process that will reduce the monthly payment for a set amount of time.  If the loan can not be modified or the owner has no interest the foreclosure process will start.  The bank will have the sheriff from the county where the property is located serve the owners with paperwork for a sheriff's sale.  This usually happens about 45 days before.  Also during that time the bank will advertise in the local paper that the home is heading into foreclosure.  This task is called foreclosure by advertisement.

The day of the sheriff's sale the bank holding the first position will be the one who will buy back their interest in the property.  From that day forward in the state of Minnesota there is a six month redemption period.  Any time during this redemption period or before the sheriff's sale the home owner can pay all the past due amount including other fees the bank tacks on and keep the home.

At the end of the six month redemption period if the home owner has not resolved the issue with the bank the home is then fully foreclosed and the bank now legally own the property.  The sheriff will ten post a notice of eviction on the door giving the home owner 24 to 48 hours to leave the home.

If you are facing a foreclosure the best advise I can offer is speak to a real estate attorney who can advise you of your rights under the law.  then contact a real estate agent about your options to avoid foreclosure.

To watch a video on this subject CLICK HERE

Tom Sommers/Edina Realty