FAQ: Common Queries & Answers about Real Estate Foreclosures in Minnesota

FAQ: Common Queries & Answers about Real Estate Foreclosures in Minnesota

FAQ: Common Queries & Answers about Real Estate Foreclosures in Minnesota

1. What occurs during a real estate foreclosure sale in Minnesota?

The sheriff of the county where the property is located reads the published Notice of Foreclosure Sale, solicits bids, and then issues a Sheriff’s Certificate of Sale (for foreclosure by advertisement) or a Sheriff’s Report of Sale (for foreclosure by action). In foreclosure by action, the court must confirm the sale, after which the Sheriff's Certificate of Sale is issued.

2. Who can participate in a foreclosure sale?

Anyone can participate, but due to Minnesota's redemption rules, it's uncommon for anyone other than the foreclosing creditor to bid.

3. Does the foreclosing creditor need to bring cash to the sale?

No, the foreclosing creditor may "credit bid" the debt secured by the mortgage. Others must bid with cash or certified funds.

4. What does the highest bidder acquire?

The highest bidder obtains ownership of the property but is subject to existing reservations, restrictions, easements, prior liens, owner's redemption rights, and junior lienholder redemption rights.

5. What are the redemption rights of the property owner?

During the redemption period, the owner retains ownership rights, including occupancy, rent collection, and the right to redeem by paying the Redemption Price.

6. What happens if the owner redeems?

When the owner redeems, the rights under the Sheriff's Certificate of Sale are extinguished, and junior liens are revived. A Certificate of Redemption is issued as proof.

7. What happens if the owner doesn't redeem, and there are no junior liens?

The foreclosing creditor becomes the fee owner of the property, free of the mortgage but subject to prior mortgages or liens.

8. What are the redemption rights of junior lienholders?

A junior lienholder can redeem by filing a Notice of Intention to Redeem before the owner's redemption period ends. The first junior lienholder to file has a seven-day option to redeem.

9. How do redemption rules work with multiple junior lienholders?

Each junior lienholder's redemption rights depend on their lien's priority. The first to file the Notice of Intention to Redeem has the first option.

10. What happens to prior mortgages and liens in a junior mortgage foreclosure?

Senior mortgages and liens remain unaffected. The new owner may choose to pay them off, but it's not required.

11. How long is the owner's redemption period?

In most cases, it's six months, but it can extend to 12 months in specific situations, like substantial principal payments or large land sizes.

12. Do junior lienholders receive notice of senior lienholder foreclosure?

In foreclosure by action, junior lienholders are named as defendants. In foreclosure by advertisement, notice isn't generally required, so junior lienholders should file a Request for Notice to protect their rights.

13. What is a deficiency claim?

A deficiency claim arises when the property's value is less than the mortgage debt. The deficiency is the difference between the amount bid and the mortgage debt.

14. Does Minnesota have an anti-deficiency statute?

Yes, Minnesota's anti-deficiency statute prevents pursuing a deficiency claim against the mortgagor in foreclosure by advertisement with a redemption period of six months or less.

15. Does the anti-deficiency statute protect guarantors?

Minnesota's current case law suggests that guarantors, who are not also the mortgagor, can be pursued for a deficiency claim, even in foreclosure by advertisement.

16. What are reinstatement rights?

Minnesota's reinstatement statute allows borrowers to cure defaults before the Sheriff's sale, preventing foreclosure. Reinstatement is unique to real estate mortgages and doesn't apply to matured loans.

17. What is foreclosure by advertisement, and how long does it take?

Foreclosure by advertisement is common in Minnesota. It involves publishing a foreclosure sale notice for about six weeks, with the sale occurring approximately eight weeks after the Notice of Pendency. The redemption period is usually six months.

18. What is foreclosure by action, and how long does it take?

Foreclosure by action involves a lawsuit and is more time-consuming. The duration varies, depending on how the lawsuit concludes (default judgment, summary judgment, trial, or an agreement).

19. Why choose foreclosure by action over foreclosure by advertisement?

Commercial mortgages often use foreclosure by action to preserve deficiency claims, resolve title issues, and address additional collateral and guarantors.

20. When can a lender negotiate a voluntary foreclosure agreement with a two-month redemption period?

Voluntary foreclosure agreements (VFAs) with a two-month redemption period are available for non-homestead, non-agricultural properties. Certain conditions must be met, including the lender waiving a deficiency claim, and the mortgagor agreeing to various terms.

21. When can a lender benefit from the reduced five-week redemption period for abandoned residential properties?

To reduce the redemption period to five weeks, specific criteria must be met, such as the property's size, type, and evidence of abandonment, as defined by the court.

Still have questions? Contact local expert REMAX Professionals Brian Zimpel

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