How to avoid a sheriff’s sale and keep your house
Facing the possibility of foreclosure and the risk that your lender will take possession of your home is stressful and can be overwhelming. Understanding the process and your options can give you time to plan, which can help alleviate some of the stress. If your goal is to stay in your home, it is crucial to avoid a Sheriff’s Sale, which is the date when the house is sold at a public auction.
There are two types of foreclosure: Foreclosure by Action through the court (aka Judicial Foreclosure) and Foreclosure by Advertisement. Most foreclosures in Minnesota are Foreclosure by Advertisement, which is what we’ll focus on in this blog.
The foreclosure process and timing differ by state. In Minnesota, the process is typically 12 months. This includes an initial six-month phase which leads to a Sheriff’s Sale, followed by a six-month Redemption Period. (Note: reverse mortgages and properties more than five acres have a longer process.)
Options to Prevent the Sheriff’s Sale
To prevent a Sheriff’s Sale there are several strategies you can use:
- Reinstatement, or paying the full amount past due on the mortgage to bring the loan current. Partial payments will likely be returned or placed in an “unapplied funds” account and not put towards the loan until the full amount has been accumulated.
- Work out an agreement with the lender. This can include:
- A repayment plan, making a larger payment until you are caught up.
- Forbearance, or a temporary pause in payments.
- A loan modification to lower your monthly mortgage payment.
- A deferral of the past due amount to the end of the loan.
- File for Chapter 13 bankruptcy. This forces the lender to accept a repayment plan on the past due amount, which will be a payment in addition to the mortgage payment.
- File for a postponement of the Sheriff’s Sale, which must be done at least 15 days prior to the Sheriff’s Sale date. Postponement will delay the sale for five months but will shorten the six-month Redemption Period to just five weeks. Postponement does not give you longer in the home, but it does give you more time to get one of the other three options above into place.
After a Sheriff’s Sale
Once the Sheriff’s Sale takes place, the mortgage enters the Redemption Period (six months or five weeks if you have postponed the Sheriff’s Sale). The only ways to keep the house during the redemption period are:
- Refinance the entire loan with another lender. Typically, this is difficult for homeowners in foreclosure since their credit has taken a hit due to delinquent mortgage payments.
- Pay off the entire amount owed on the mortgage. Again, this also would be difficult, since the homeowner has not been able to pay the regular mortgage payments, let alone the entire mortgage.
NOTE: Sale of the property by the owner can be done at any point before the Sheriff’s Sale up to the end of the Redemption Period.
At the end of the Redemption Period, all residents must vacate the property.
For more details on these options and the foreclosure process, read our other blog posts:
- Behind on Your Mortgage: Options to Help Keep Your Home
- Avoid Foreclosure; Get a Loan Modification
- Facing Foreclosure? How to Get Your Mortgage Back on Track
- What Are My Options After the Sheriff's Sale?
Finding Support to Keep Your Home
If you start to fall behind on your mortgage or anticipate falling behind, always contact your lender to let them know your situation and ask about your options. Then, contact a HUD-Certified Housing Counselor in your state who can talk you through the options and help you set up a plan to reach your goal on the house. Foreclosure laws vary by state, so make sure you connect with a local agency.
If you live in Minnesota, LSS Financial Counseling has HUD-Certified financial counselors available for appointments and to answer questions. Call 888.577.2227 to schedule an appointment. It's always better to take action right away. So don't wait; call us today!
Not in foreclosure and just need some support to move your finances in the right financial direction? Give us a call or get all your support online.
**Please note that none of the information above is legal advice. Be sure to consult with a reputable attorney regarding bankruptcy or other legal questions.
Author Marjorie Klimek is a Certified Financial and Housing Counselor with LSS Financial Counseling.