FAQ
Foreclosures:
Frequently Asked Questions
What is a foreclosure?
It is the legal process that the lender undertakes
to gain title to the home that was used as collateral for the mortgage loan that is now in
default. The foreclosure process in Minnesota takes 14 to 18 months from the date
the previous owner made their last payment , until the lender or agency has clear title
and the property ready for sale. This includes a 3-4 month delinquency period,
before a Notice Of Publication Of Sheriff's Sale period that can last up to 2 more
months. After the Sheriff's Sale the owner receives a 6 to 12 month statutory
Right Of Redemption to make up all back payments. At the end of the Redemption
Period the lender receives title to the property. If the loan was FHA insured
or VA guaranteed the lender is paid off at this time and the agency
receives title to the property. The lender or agency must now secure the
property, winterize the plumbing, make repairs, order reports, inspections, and
appraisals before starting to market the property for sale.
How long has this property been vacant?
Information from the seller ( lender or agency ) is
limited since they have not lived in the home, and usually don't know when the
previous owner moved out. Usually the property is occupied up until the end of the
Redemption Period since the owner has the right to live there until then, and they are
living there, house payment free.
What kind of warranties are there?
Policies vary depending on the seller , but
generally you are purchasing the home in "as-is" condition. Any repairs to
the property are generally for health and safety reasons or to satisfy a city truth-in
housing or code compliance inspection requirement.
Why is the water turned off?
This is done to protect the plumbing in the home
from freeze damage in case the heat shuts off. The water is turned off and the lines
drained and antifreeze is placed in the plumbing traps. All that is required to
dewinterize is to turn the water on and flush the system.
Are the appliances included?
They are treated as personal property that was
abandoned by the previous owner, that are included in the sale but not warrantied.
Is the previous owner's mortgage assumable?
The foreclosure process wipes off the previous
owner's mortgage, so there is nothing left to assume.
What type of financing is available?
Generally a seller is looking for someone who can
pay cash or can qualify for new financing. You can go to the lender of your choice
and obtain whatever type of financing you would like. The condition of the property
and the reluctance or inability of the seller to make needed repairs may preclude the
availability of some types of financing. Sometimes the seller will provide the
financing with contract for deed financing.
Are all foreclosures in poor condition and in bad areas?
The foreclosure usually has to do with an
individual's personal circumstances and not the property or location, so any home in
any area has the potential to end up in foreclosure. Most of the homes have
had no cleaning and / or repairs done to them to enhance marketability prior to
being offered for sale. Some updating , painting, cleaning, new carpeting, or
replacing missing appliances is usually required. Often the homes in the worst shape
are priced the best and end up being the best bargains.
Who pays any delinquent taxes, utilities, association
fees, and special assessments?
These policies should be addressed in the purchase
agreement or seller's policy statement as part of a bid. It is important to check
the status of the taxes because they often go to a non-homestead basis when the property
was vacant.
Will they take a contingent offer?
Usually they will take it contingent upon financing
but not contingent upon the sale of your home.
The homes are vacant and costing them money to hold on to, so they are motivated sellers
and want them sold fast.
