What Happens With Every Missed Duplex Payment?

How many duplex payments are you behind?

The answer tells me almost everything I need to know to short sale a Minneapolis duplex.

While each lender has its own rhythm and schedule, there is largely a predictable pattern of what happens as property owners miss more and more payments in the state of Minnesota.

(Please note foreclosure timelines and practices vary by state, so it’s important you check with someone in your specific area as to which guidelines apply to you.)

According to the Minnesota Home Ownership Center, the following is an average timeline for the foreclosure process in Minnesota:

1st Missed Payment – At this point, the lender generally calls the duplex owner and follows up with a letter reminding them about the overdue installment.

2nd Missed Payment – The calls and letters continue, with one of those correspondences being a thirty day default letter.

3rd Missed Payment – Attempts to collect continue, but at this juncture, things begin to change. The account is usually transfered to the foreclosure department, with a “Notice of Intent to Foreclose” sent to the duplex owner.

4th Missed Payment – Things start getting expensive with the fourth missed payment, as this is when the account is forwarded to a foreclosure attorney who, of course, starts charging legal fees; fees that are added to the property owner’s debt. The attorney starts earning his or her keep by sending a notice to the duplex owner.

5th Missed Payment – Matters become more serious with the fifth missed payment, because it’s at this point that the attorney schedules the Sheriff’s Sale. Once the sale is scheduled, notice of it is published for six consecutive weeks, usually in publications like Finance And Commerce or Capitol Report.

6th Missed Payment – After the sixth missed payment, the occupant of the property is served notice of the Sheriff’s Sale. This preceeds the sale by four weeks.

7th Missed Payment – The Sheriff’s Sale occurs. This is the deadline to become current with payments. If the duplex owner fails to do so, he or she has a six month redemption period during which he or she can pay off the entire mortgage, including late and legal fees. The owner retains the right to occupy the duplex, and unless the lender intervenes, collect rents. By the end of the redemption period, the entire mortgage must be paid off or the property must be vacated.

Throughout the stretch of missed payments, as well as the redemption period, the duplex owner maintains the right to sell the property and retain any equity that exists (believe it or not, many people have equity in their properties).

At the end of the redemption period, however, all the owners rights end. And whoever has the sheriff’s sale certificate (usually the lender) becomes the owner of the property.

How does this influence the sale of a duplex? Simple. The more time we have left, the more freedom we have to pursue a higher price. This is important to duplex owners, as they face tax consequences for the amount of debt that’s forgiven. The more we get for the property, the lower their tax debt.

If, on the other hand, there is very little time left before the bank takes back the income property, then we have to slash the price dramatically.

After all, no matter how much we reduce it, statistics indicate that on average, short sales net more than foreclosures. This not only helps a homeowner reduce their tax burden, but also increase the likelihood of being able to restore their credit in a shorter period of time.