You’re Not Out — Michigan Redemption Rights Explained (What You Can Still Do After Foreclosure)
Financial difficulties can lead to major problems and headaches if you’re unable to make payments. This is especially true with mortgages, as lenders can foreclose on borrowers homes and take possession of them once repayments are missed.
Part of the foreclosure process in Michigan involves a Sheriff’s Sale, during which the home is put up for sale through an auction process, with the highest bidder becoming the new owner of the property.
However, this is not the end of the line for borrowers, even though many Michigan homeowners might think so. Thanks to Michigan’s redemption period, borrowers can still reclaim their homes even after a sheriff’s sale has taken place.
So, while a sheriff’s sale might cause quite the psychological shock, Michigan’s laws protect homeowners, allowing them to not lose their homes even after the auction ends.
In this article, we’ll explain in more detail the foreclosure and redemption process in MIchigan.
What the Sheriff’s Sale Actually Changes (And What It Doesn’t)
Up until the actual Sheriff’s Sale takes place, the homeowner can still submit an application for loss mitigation. If that doesn’t happen, the Sheriff’s Sale will take place, at which time an auction will be held for the property.
The Sheriff’s Deed will list the last day that the property can be redeemed.
The immediate thing that the completion of a Sheriff’s Sale does in Michigan is sell the property to a new owner. That owner (who is the winner of the auction) will receive the Sheriff’s Deed, which constitutes the legal change in title.
If no one purchases the property, it will be labeled REO, or Real Estate Owned. At this point, the borrower’s credit report will reflect the foreclosure.
Most importantly, though, the end of a Sheriff’s Sale starts the redemption period in Michigan.
What a Sheriff’s Sale doesn’t immediately change is the homeowner’s rights to the property. No homeowner is evicted from the property at this point, and they still have the option to regain ownership of the property.
Homeowners also generally are allowed to retain complete possession of their home through the entire redemption period, which we’ll discuss in more depth in the next section.
In other words, while the purchaser of the home at Sheriff’s Sale is the technical owner of the home at this point, they aren’t free and clear.
Your Statutory Rights to Stay in the Home During Redemption
A Sheriff’s Sale in Michigan doesn’t allow the buyer to legally remove the homeowner from the property. They are typically allowed to live in the property during the redemption period, and they’re not required to make payments anymore.
During this period, the homeowner does, however, need to maintain property insurance, maintain the utilities and the property itself if they are going to live in it.
In addition, the homeowner has to allow the new purchaser to inspect the home and all of the structures on the property during the redemption period.
Homeowners have to file a sworn Affidavit of Occupancy, which is filed with the county clerk, during the redemption period. This will prove that they are continuously living in the home, which protects their rights to live in it during the redemption period and to eventually redeem it if they want.
If this affidavit is not filed, state law (MCL 600.3241) will presume that the property is abandoned, which gives the owner rights to take possession of the property — even if the redemption period hasn’t ended.
Understanding the Michigan Redemption Clock
Michigan’s redemption period begins the day that the Sheriff’s Sale is held. In most cases, it will last for six months from this time.
There are some instances in which the redemption period can be extended to up to 12 months. For instance, farming property can qualify for this extended period, and so can any property if the amount that is still due on the mortgage is less than two-thirds of what the original amount owed was.
The redemption period can become shorter, though, if the property is found to be abandoned. This can happen if the homeowner actually leaves the property, if they do not file the sworn Affidavit of Occupancy, if they cause damage to the home or if they refuse an inspection of the property, for example.
What You Can Legally Do During the Redemption Period
Michigan homeowners still retain a lot of rights during the redemption period. They can sell the property, for example, through an investor sale, a traditional sale or by assigning redemption rights.
This can be a complicated process, though, that often requires the property to be sold for more than the auction price.
Homeowners can still figure out ways to redeem the home, either by paying off what’s due on the mortgage or refinancing the loan and use the remaining equity as part of the redemption.
They can also negotiate with the purchaser or lender to gain redemption support, extensions or a cash-for-keys agreement.
It’s even possible that homeowners can challenge some of the lender’s conduct leading up to the Sheriff’s Sale, or deficits in notice and posting of the sale.
Buyer Inspection Rights & Your Privacy
Homeowners who are foreclosed on have privacy rights in MIchigan, though they must require the Sheriff’s Sale buyer to inspect the interior of the home and any structures on the property.
The buyer, though, must provide the homeowner with written notice detailing the inspection and give them at least 72 hours notice that they want to do so. They also must coordinate the day and time with the homeowner.
The buyer also has a right to get information on the property once per month during the redemption period. If they don’t get a response from the homeowner, or if the buyer believes that damage has been done, then they can seek to gain possession of the home early through the courts.
What the Servicer or Investor Can and Cannot Do During Redemption
Servicers or investors are not allowed to force the homeowner to move out early, nor are they allowed to arbitrarily force early eviction — or make threats to do so. As mentioned, they even must give proper notice for property checks and inspections.
If the homeowner believes their rights have been violated and contact from a servicer crosses the line into unlawful pressure, they can file notice with the courts. They’ll likely have to prove the improper behavior happened, through submitting any documentation they have about it.
If You Want to Redeem: How the Math Works
To redeem a property, homeowners must pay the full Sheriff’s Sale price, plus interest and all allowable fees. This must be done in full, though it can be financed through another mortgage or loan, if the homeowner is able to obtain one.
In almost all cases, buyers demand to receive certified funds only. That’s because they want to ensure that the funds being sent to them are indeed there.
The End of Redemption: What Happens When the Clock Runs Out
When the redemption clock has run out in Michigan, homeowners will receive an official summons to appear in court. This is an eviction case, and will only be scheduled and held if the homeowner hasn’t already left the home on their own.
During this hearing, the court will set a date that the Sheriff will go to the home to physically remove the homeowner from the property, if necessary. Any personal property that the homeowner has is theirs to take with them, though if any is left behind after they’re evicted, it becomes the legal possession of the buyer.
After the redemption deadline has passed, it’s possible for homeowners to still negotiate with the buyer, but it’s very rare. This emphasizes how important it is to redeem the property during the period if that’s something you want to do.
How Babi Legal Group Helps Homeowners During Redemption
The foreclosure process can be complicated in Michigan. Understanding your rights during the entire process, including the redemption period, is essential to protect your interests.
If you’re facing foreclosure or are already in the redemption period, it’s important to consult with an experienced foreclosure lawyer like the ones at Babi Legal Group.
Our expert attorneys can interpret the Sheriff’s Deed and calculate your real timeline, stop illegal conduct and help enforce your right to stay in the home. We can negotiate with buyers, investors and lenders to maximize your options, and prepare strategies for selling, redeeming or defending possession of the property.
For a free consultation, please contact us today.
