Why Zillow’s Minneapolis Duplex Auctions Are The New Zestimates

Duplex Sheriff's SaleThe real estate web site Zillow sure causes a lot of misunderstandings.

Initial confusion was a result of their Zestimates. Their algorithm had many duplex and home owners believing their properties were worth tens of thousands of dollars more than they actually were; and more recently, tens of thousands of dollars less.

More recently, Zillow’s “auction” properties have lead many duplex buyers to believe they can show up someplace, get a bidder number, and bit on a property featured on the web site.

Now, in theory, a buyer can do just that. However, at least in Minnesota, there’s an enormous hurdle in the process.

The auction the Zillow properties can be purchased at is the sheriff’s sale.

So what’s a sheriff’s sale?

When a duplex owner falls behind on mortgage payments, the bank tries to get them to get current. After three to four months of missed payments, the lender then issues a Notice of Default (NOD). This notice is published in a local periodical for a period of time, and it essentially states if the duplex owner doesn’t get caught up by the six month mark, the lender will auction the property off at a sheriff’s sale.

At the sale, the bank usually “buys” the property back. While it’s easy to envision this as the bank showing up with a briefcase full of cash, in reality, it’s a paper transaction. At the “auction” the bank is essentially asking if anyone will pay them the amount they’re asking for to

Most of the time, the amount they bid is equal to the amount the duplex owner owes on the property. Every now and then, for whatever reason, the bank decides they’ll take less.

Now, you are welcome to “buy” the property for that amount of money. First, you have to have a cashier’s check in hand sufficient to pay for the property in its entirety. In other words, you need to show up with the equivalent of cash to buy a property you’ve never been inside.

To complicate things further, you can’t just call a locksmith to meet you at the property and let you in. In Minnesota, the current duplex owner has six months to redeem the property. In other words, to pay off the amount of the winning bid, as well as additional attorneys fees and interest.

In other words, you tie up your money for six months. And, to make sure you’re following the letter of the law, you need to hire a real estate attorney to conduct the eventual removal of the current owner.

What happens when the six month redemption period is over and the current occupants have left? You take possession. Best case scenario, they left the place in perfect condition.

More likely, however, as they didn’t have the money to pay the mortgage, they didn’t have the money to do repair and maintenance either.

So again, as with their Zestimate, Zillow’s good intentions result in something that isn’t quite true.