What is a foreclosure?
A foreclosure is a legal process in which a bank or other secured creditor sells or repossesses a piece of real property because the owner has failed to make payments on their mortgage. There are four ways the foreclosure process can end:
The borrower makes an arrangement with the lender to pay off the default amount to reinstate the loan.
The borrower sells the property during the pre-foreclosure period. If the borrower sells the property during this stage they will avoid having a defaulted loan on their credit history.
Once the lender is awarded final judgment by the courts the lender will sell the property at public auction.
If the property is not sold at auction or the bank purchases the property at auction the lender gains possession of the property.
What are the stages of foreclosure?
1. Pre-foreclosure - this is the period of time when the first legal proceedings takes place by the lending institution against the property owner. It is during this period of time that the property owner has a chance to settle their mortgage debt. The property owner can sell the property during this period. If the property is sold during this stage the owner can avoid having a defaulted loan on their credit history. 2. Foreclosure Auction - If the debt is not settled and the lender is awarded final judgment by the courts the lender will sell the property at public auction. 3. Real Estate Owned Property (REO) - If the property is not sold at auction the lender regains possession of the property.
Are sold parcels subject to former owner rights or other liens?
The foreclosure process extinguishes the rights of former owners of interest, including tax payers, mortgage companies and banks. The only liens that survive foreclosures are those filed by governmental agencies in relation to the environmental protection act. Individuals interested in parcels associated to Department of Environmental Quality (DEQ) liens should contact the DEQ to discuss lien amounts that may become the responsibility of purchasers. Recorded or visible easements, right of ways and deeds, and environmental restrictions also survive the foreclosure. The State of Michigan is obligated to serve notice of the show cause hearings and foreclosure hearings to all lien holders. In the rare event that the State of Michigan fails to properly notify the Internal Revenue Service (IRS) regarding property on which the IRS has placed a lien, such IRS liens would survive the foreclosure process.
What is the status of associated property taxes or other bills?
Individuals who purchase parcels at our auctions are responsible for the taxes that are due and payable in the year of purchase, as well as any subsequent years taxes. In addition, buyers assume responsibility for remaining years of special assessments, beginning in the year of purchase. Buyers are not responsible for costs incurred by the local municipality during the year of the auction. All liens for costs of demolition, safety repairs, debris removal, or sewer or water charges are cancelled effective December 31 (211.78m(13)).
Are buyers responsible for associated special assessments?
Special assessments levied through the year of the auction are included in the minimum bids. All bidders should contact city or township offices to determine if there are any outstanding bonded assessments for future tax years on the properties being offered.
How soon may the buyer take possession of structures or evict tenants?
Immediately after purchase, buyers should take steps to secure their equity in the property by securing vacant structures and obtaining homeowners insurance for occupied structures. Buyers should not take possession, nor attempt eviction of occupants until they receive copies of their deeds, which are issued thirty days after purchase. The State sends deeds directly to the county registers of deeds for recording within thirty days of the sale, and later forwards the recorded deeds to the purchasers. Personal property located on tax foreclosed land or within structures situated on foreclosed land does not belong to the State of Michigan and is not subject to the ownership of prospective real property purchasers. Successful purchasers should investigate personal property ownership, and attempt to notify personal property owners of their rights to reclaim such property.
Do I need a real estate agent to buy a foreclosure property?
A real estate agent is needed to purchase government owned foreclosure property, but you don't need one to purchase REO properties or foreclosure auction properties. However, we do recommend that you find a real estate agent to help ease you through the buying process. If you do not have a local real estate broker please contact Jim Doyle with Century 21 at jdoyleC21@gmail.com
Will I be able to inspect the property before the auction?
In most cases you will not be able to inspect the property before the auction. Make sure you research the property that you intend to buy. Auction purchases are "as is" with no warranties given, no title insurance provided, and in most cases are cash-only, you need to know as much about the property you are bidding on before the auction takes place. A great way to research the foreclosure auction property you are interested in is by ordering a property report through jdoyleC21@gmail.com
What is an REO?
An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. The bank now owns the foreclosure and the mortgage no longer exists.
Should I get pre-approved for a mortgage before buying an REO?
Yes!!! Pre-qualifying for a loan is important for a potential homebuyer because it helps ensure that the buyer is in a financial position to purchase a property, and it places the buyer in the strongest possible position to negotiate with the selling agent of the REO property. When a potential homebuyer already has pre-approved financing in-hand, negotiations with REO selling agent and the lender go much smoother. Pre-approval gives you the homebuyer a concrete idea of what you can afford and shows the selling agent that you are serious about buying a home. For assistance in obtaining pre-approval, please contact jdoyleC21@gmail.com