The other day I was visiting with a gentleman who owns a Minneapolis duplex and is behind on his mortgage payments.
When I suggested it would be in his best interest to try to market the property as a short sale, he told me the property was already sold.
I was surprised to hear this, so I probed a little further, asking how he’d managed to get it sold and where he found a buyer. His answer?
At the sheriff’s sale.
While we’ve all watched late night infomercials suggesting buying property at a sheriff’s sale at a deep discount, that’s not the case here.
In Minnesota, sheriff’s sales are usually conducted when a lien has been placed against a property in the amount of a judgement.
When a duplex owner falls behind in mortgage payments, the foreclosure process begins. About the time he is six months or more behind, the mortgage holder will take the matter to a sheriff’s sale. By this time, all of the legal fees the lender incurred while trying to collect the debt in the previous months have been added to the amount due on the loan.
At the sheriff’s sale, the minimum bid amount is most often the total amount owed on the property, plus the accrued legal fees. late fees and penalties.
In today’s real estate market, the total is often more than the property is worth. As a result, there aren’t a lot of Carleton Sheets disciples standing on the court house steps trying to get rich.
In essence, then, the winning bidder is the bank that holds the note on the property.
From the date of the sheriff’s sale, the property owner is given a 6 month “redemption period” in which he can pay off the total amount of the lien or judgement on the duplex.
This doesn’t happen very often.
More likely, one of two things will. The home owner may choose to let the property go back to the bank through foreclosure or, he may choose to attempt a short sale.
If the rights to the property belong to the bank following the sheriff’s sale, it does not necessarily mean a Realtor can’t help the duplex owner attempt to sell the property for less, then negotiate with the bank for a settlement or short sale.
Bankers know these properties aren’t worth what people either paid or refinanced them for just a few years ago. What’s more, a foreclosure always ultimately costs them more than a short sale.
Not to mention the permanent black mark a foreclosure puts on a former property owner’s credit report.
So remember, if your property has recently sold at a sheriff’s sale, you still own it. However, you won’t for long. The choice between a having a short term credit hit (short sale) vs a long term one (foreclosure), should be easy.
Call a Realtor who’s a Certified Distressed Property Expert (CDPE) to help. There aren’t that many of us, but our numbers are growing. Each and every one of us has been trained to carry many of the burdens of imminent foreclosure for you.
And if you can’t find a CDPE and I’m not in your market, call or email me. I’d be happy to help you find one.