About the Foreclosure Process in MN

The foreclosure process in Minnesota can last several months.  The most important thing that home buyers need to understand is that a foreclosure is a process. There three main parts to the foreclosure process and I will simplify the foreclosure process in Minnesota here.

Part one of the foreclosure process is the Pre-foreclosure Period

In Minnesota, a court foreclosure begins when a lender notifies the borrower of the default. This is done through a letter that the bank representative drafts and sends to the home-owner.  This letter is called a notice of default and is also referred to by Real Estate Agents and Investors as an N.O.D. The letter is also recorded by the county.  The lender then files a court action against the borrower. If the court rules against the borrower, a sale is scheduled.  Popular websites such as Zillow and Realty Trac have systems set up that get this information through the counties and publish it on their websites.  It is important for homebuyers and investors to understand that this information is public record and available to anyone.  

The majority of Minnesota foreclosures are handled out of court through a power-of-sale clause contained in the mortgage. Under most mortgages, a lender must mail a default notice to the borrower before they schedule a sale.  

For either scenario, the borrower can stop the foreclosure any time before the foreclosure sale by paying the default amount and fees incurred.

Part two of the foreclosure process is the notice of sale/auction

The notice must include the borrower, owner, and lender names; the original loan amount; the mortgage date; recording information; the default amount due; a property description; the time and location of the sale; and the redemption period. The notice must be published for six weeks, and the occupants of the property must be given the notice in person at least four weeks prior to the sale. The county sheriff or sheriff’s deputy conducts the foreclosure sale between 9:00 a.m. and sundown at a public place, usually the sheriff's office. Anyone may bid at the sale, and the property is sold to the winning bidder. The lender usually has a representative that is the high bidder and usually the only bidder.  They do this to protect the asset that they will likely take back if the homeowner does not pay the winning bids plus legal fees before the end of the redemption period. The winning bidder must be prepared to pay the full amount in cash or a cashier’s check. The sheriff may postpone the sale by publishing a notice in the newspaper where the original notice of sale was published. After the sale, the sheriff gives a certificate of sale to the winning bidder. The certificate of sale effectively transfers ownership and possession rights to the winning bidder after the redemption period.  The redemption period is where most of the action happens.  If the winning bid amount is lower than the value of the home, investors will approach the home owner and attempt to purchase the deed from them.  Homeowners will also attempt to sell the home so that they can pay the redemption price and avoid having a foreclosure on their record.  The lender usually has a representative that is the high bidder and usually the only bidder.  They do this to protect the asset that they will likely take back if the homeowner does not pay the winning bids plus legal fees before the end of the redemption period. The winning bidder must be prepared to pay the full amount in cash or a cashier’s check. The sheriff may postpone the sale by publishing a notice in the newspaper where the original notice of sale was published. After the sale, the sheriff gives a certificate of sale to the winning bidder. The certificate of sale effectively transfers ownership and possession rights to the winning bidder after the redemption period.  

Part three of the foreclosure process is the redemption period

The redemption period is where most of the action happens.  If the winning bid amount is lower than the value of the home, investors will approach the home owner and attempt to purchase the deed from them. Homeowners will also attempt to sell the home so that they can pay the redemption price and avoid having a foreclosure on their record.

In Minnesota, a borrower usually has a six-month redemption period, but some property types and mortgages allow for a 12-month redemption period. During this time, the borrower can redeem the property by paying the total amount of the bid plus interest and any applicable costs.

Real Estate Owned is also known as Bank Owned or abbreviated to REO

Once the redemption period ends, the party that owns the certificate of sale (usually the bank) is the new homeowner and can legally take possession of the house.  If someone is still living in the house than the new owner must go through the eviction process.  Once the property is vacated the banks' loss mitigation department will officially list the home for sale with one of the Minnesota real estate listing agents that they contract with.  This is when the consumer will see the home listed for sale as a foreclosed property or a Real Estate Owned (REO) property. If you or someone you know is facing a foreclosure in the Twin Cities or is interested in learning more about foreclosures in the Twin Cities contact the Minnesota Property Group today and ask to speak to our foreclosure specialist.

New Listing

Email Alerts

Subscribe Today!
Why List

With Us?

Learn More!
Have

Questions?

Learn More!
From Our Blog
Thursday, November 30, 2017

Is 2018 The Year of the Home?

Is 2018 the Year of the Home? When you make the transition from renter to owner, you become the recipient of many benefits, both practical ones, and emotional ones as well.  For many people, homeownership is an important rite of passage on the ...  Read More