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If you’re behind on your mortgage payments, you could face foreclosure on your home. In Michigan, most foreclosures are done without going to court.
Most foreclosures start when your lender says they will sell your home unless you catch up on your payments or make other arrangements with them. Your lender is the bank or company that holds the mortgage on your house.
Preventing Foreclosure
If you are facing foreclosure, it is a good idea to call your mortgage servicer as soon as possible. You can find out who your mortgage servicer is and their contact information by looking at your monthly mortgage loan statement. You can talk to them about your situation and whether there are any programs you could apply for to help you avoid foreclosure.
You can also contact a housing counselor to get help. Housing counselors are free. You should never pay a fee for help working with your lender. Find a counselor who’s certified by the Michigan State Housing Development Authority (MSHDA) or the U.S. Department of Housing and Urban Development (HUD).
Here is a list of HUD-certified counselors in Michigan.
Foreclosure
If you can’t modify your loan or catch up on your payments, your lender can start the foreclosure. They do this by advertising an auction of your home. This is called a Sheriff’s Sale. The notice of the foreclosure is published in a local newspaper and posted on your home.
The Sheriff’s Sale
The notice of the Sheriff’s Sale is published for at least four weeks. During this time, you can avoid foreclosure by doing any of the following:
- Selling your home
- Refinancing your home
- Getting a loan modification
- Paying all missed payments and late fees
- Filing for bankruptcy (if you are considering this, you may want to talk to a lawyer)
If your home is sold at the Sheriff’s Sale, the buyer will usually be the lender.
If the home is sold for less than what you owe on it, you might still owe the unpaid amount. That amount is called a deficiency. Your lender could sue you to collect the deficiency from you.
After the Sheriff’s Sale – The Redemption Period
After the Sheriff’s Sale, you have some time to try to avoid foreclosure and save your home. This is called the redemption period. During this time, you can continue to live in the home. You don’t have to pay your mortgage during this time. You may want to save money to try to save (redeem) your home or work out a “cash for keys” deal with the buyer of your home. Learn more below.
Redeeming Your Home
During the redemption period, you can avoid foreclosure by redeeming your property. To do this, you’ll have to pay your lender all of the following:
- The amount that the home was sold for at the auction
- Some fees from the sale
- Interest that starts from the date the home was sold
You can find out the amount you have to pay to redeem your home from paperwork included in the deed. You can get this at the Register of Deeds in the county where your home is located.
Time to Redeem
For most homes, you have six months to redeem. You can find out the exact deadline for you to redeem on the certificate of sale for your home, which you can get at the Register of Deeds in the county where your home is located.
Home Inspections During the Redemption Period
Whoever bought your home at the auction has the right to inspect it during the redemption period. Before asking to inspect your home, you should have gotten a notice from the buyer with the following information:
- Who the buyer is
- How you can contact the buyer
- When the home was bought
- The sale price
- An estimate of when the redemption period ends
- Instructions on how to move out
- A statement that you need to give the buyer notice before you move out
You should get at least 72 hours’ notice before the inspection. The inspection should take place at a reasonable time, and the buyer should try to work with you to find a good time, if possible. The buyer also has the right to look at the outside of your home as many times as they want during the redemption period.
After the buyer inspects your home, they can ask for information or evidence (like photographs) of the condition of the home. They can’t ask for this more than once per month or more than 3 times total in a six-month period. They can ask more often if they think you may cause damage to the home, or have already damaged the home. When you get a request, you have to give that information within 5 days. If you don’t do that, the buyer can ask for another inspection.
You can’t unreasonably stop the buyer from inspecting your home. If a homeowner unreasonably refuses an inspection, the buyer can file an eviction case against them.
Damage
If the buyer finds damage to the home or thinks that the home will be damaged soon, the buyer can file an eviction case against the homeowner. Before an eviction case can be filed, the buyer has to give the homeowner notice that they plan to file an eviction case if the damage is not fixed within 7 days. The buyer can’t file an eviction case if the homeowner fixes the issue in 7 days or if the buyer and the homeowner come to an agreement about when the repairs will be made.
Damage can include any of the following:
- Stripped plumbing, siding, wiring, or other metal material
- A missing furnace, water heater, or AC unit
- Missing walls, ceiling, or roof
- If the condition of the outside of the home creates a risk of criminal activity on the property
- Failing to comply with local laws on blight, sanitation, public safety, and property maintenance
In addition to eviction, if you cause damage to the home beyond normal wear and tear during the redemption period, the buyer could also sue you for damages.
Cash for Keys
If you aren’t able to pay in time to save (redeem) your home, you can try to work out a “cash for keys” deal with the buyer. In a “cash for keys” deal, you move out of the home before the redemption period ends in exchange for money.
Moving Out of the Home
If you aren’t able to pay in time to save (redeem) your home and you have to move out, you need to tell the buyer when you plan to move. You need to tell them at least 10 days before you plan to move. You can send this notice by e-mail, certified mail, or any other way that should get the notice to the buyer.
Eviction From the Home
Once the redemption period ends, the buyer can file an eviction case against you if you haven’t moved out. The eviction case starts when the buyer files a Summons and Complaint to evict you from your home. Carefully read over this paperwork to know when you need to go to court. To learn about the eviction process, read the articles Eviction: What Is It and How Does It Start? and Eviction to Recover Possession of Property.
Unless there was something wrong with the foreclosure, this kind of eviction is difficult to defend. If you think there was a problem with the foreclosure, you may want to contact a lawyer. If you have a low income, you may qualify for free legal services. Whether you have a low income or not, you can use the Guide to Legal Help to find lawyers in your area. If you are not able to get free legal services but can’t afford high legal fees, consider hiring a lawyer for part of your case instead of the whole thing. This is called limited scope representation. To learn more, read Limited Scope Representation (LSR): A More Affordable Way to Hire a Lawyer. To find a limited scope lawyer, follow this link to the State Bar of Michigan lawyer directory. This link lists lawyers who offer limited scope representation. You can narrow the results to lawyers in your area by typing in your county, city, or zip code at the top of the page. You can also narrow the results by topic by entering the kind of lawyer you need (divorce, estate, etc.) at the top of the page.
If the court orders the eviction, you usually have 10 days to leave the home. You can ask the new owner for more time if you have special circumstances. If you stay, the court will order the sheriff to evict you and remove your belongings from the home.
Consequences of Foreclosure
Losing a home in foreclosure impacts your credit record for years. This can make it harder to buy another home or get other loans.
Foreclosure can also have tax consequences. You may want to talk to a lawyer or tax preparer about it.