Southfield Michigan Real Estate Attorneys?
Michigan Real Estate Law
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Michigan LAND CONTRACTS
FORFEITURE OR FORECLOSURE?
Land Contract Forfeiture is an action that is filed in the local District Court where the property is located for purposes of allowing the Vendee of the Land Contract (i.e. the Buyer) the opportunity to bring the land contract current, including all arrearage for payments, taxes, interest, costs and expenses. You would be entitled to a Judgment of Land Contract Forfeiture that allows the Buyer/Defendant 90 days pay (if less than 50 percent of the Land Contract has been paid) to keep the property or the property would be forfeited to the Plaintiff/Seller. The disadvantage is that if the Judgment is not paid, the Plaintiff only gets the property back, no money judgment. If you are seeking a Judgment for a deficiency between the value of the property and the Land Contract amount, the Foreclosure is the process, but it is more costly.
Advantages of Forfeiture: Summary Proceeding allows for a short litigation process (can obtain Judgment relatively quickly) and much less expensive than foreclosure. Short redemption period (90 days if less than 50 percent owed).
Disadvantages of Forfeiture: No money Judgment.
An action filed in Circuit Court for Land Contract Foreclosure is commenced by giving notice to the Land Contract holder of the intent to accelerate the entire balance due on the Land Contract, including all principal, interest, costs and expenses. A title commitment for insurance should be ordered prior to commencement to give all parties of interest, notice of the litigation proceeding. Defendant after service will have 28 days to respond to the Complaint or a default will be entered.
Upon entry of a Judgment of Foreclosure, which contains the full amount owed on the land contract, including principal, interest, costs and expenses (actual attorney fees are not included in the judgment), the property can be sold at a sheriff’s sale. The property does not get sold until 3 months have passed from entry of the Judgment of sale. An upset price may be set forth in the Judgment. After the Judgment, the property is sold at sale after publication costs as required by statute. A public sale is conducted and the sheriff accepts the highest bid made on the property and you may bid any amount for the property up to the Judgment amount without paying any funds. Usually, you are the only bidder at the sale. Upon conclusion of the sale, a Sheriff’s Deed is recorded at the register of Deeds and the bidder at the sale is the owner of the property after Six (6) months, if not redeemed.
An advantage of the Land Contract Foreclosure Process does allow you the opportunity for a deficiency (money) judgment against the Buyer
What is Asset Protection and how does it work in a short sale transaction?
In a short sale, a property is sold when a seller has negative equity in the transaction. We can help clients negotiate with their lender/bank the payoff or waiver of the deficiency balance on the loan thereby protecting the client’s current assets and avoid a future collection by a creditor.
- Net Sales Price: $250,000.00
- Mortgage Loan 1: $260,000.00
- Mortgage Loan 2: $40,000.00
- Closing Costs: $20,000.00
Short Sale Transaction Example
We can negotiate with lender #1 to discharge its mortgage for receipt of a certain sum with a waiver the $10,000.00 deficiency balance. The Lender for Mortgage #1 will usually pay a nominal sum to Lender #2 to discharge its Mortgage #2. The deficiency on Mortgage #2 then has to be negotiated or if not negotiated it is open for a collection against you, if not charged off by the creditor.
If you do not have an attorney, you may not understand the complex legalities of this transaction. You can be sued years after the short sale is completed on the deficiency balance by a collection agency. It may cause you to file a bankruptcy to protect yourself. You may be liable to the IRS for the waiver of debt. Your realtor may not understand what a deficiency is and the realtor will get paid a discounted rate whether you negotiate the deficiency or not. Further, the bank may commence with the foreclosure sale if you do not retain an attorney to have the foreclosure sale adjourned, allowing you time to find a buyer and complete a short sale.
Give us a call at 586-303-2211 to schedule a free consultation.