Auction property and Subject to Redemption - Michigan

[Roy Gutierrez]

Hello everyone,

I'm interested in bidding on some properties at auction, some are "subject to redemption", some have occupants. The properties are in Michigan. What are your experiences buying properties from auctions with any of these 2 issues?

Thank you in advance!

[Geof Greeneisen]

Hi @Roy Gutierrez, I assume you’re talking about buying at sheriff sales, not tax sales. At tax sales, the redemption rights have been extinguished (typically). At sheriff sales in Michigan there is a minimum 6 month redemption period, 12 months if the mortage has been paid down to less than 2/3 the original mortgage or is considered a farm property.

Each foreclosure notice spells out the terms of redemption such as the interest you can charge on the note. After purchasing the note at sheriff sale, you will need to file a buyer affidavit claiming your rights as the note holder which spells out your fees and contact information. Then you wait.

Here’s the kicker, assuming there was equity in the deal, there are a number of ways for other investors to step in and purchase your position after the sale. Yes, the mortgagor may redeem the note. In 2009, they never did, in 2018 I’m seeing this occur more and more. But this isn’t your real problem. The mortgagor can sell their redemption rights, even for as little as $1 (usually $500-$5,000 on the notes I track). So your competition might not be the bidders you see on the courthouse steps, but rather the investors talking to the mortgagor behind the scenes who will be redeeming the note in the 5th month.

Also, you will find realtors attending the sale and you’ll see them writing down the purchase prices. They then contact the owners after the sale to try to get the listing for 6 months.

There are certainly nuances to the process that will increase your likelihood of ending up with the house after 6 months, but if you’re just starting out the odds are not in your favor. I would recommend going to the sale each week for 3 months. You’ll learn who the buyers are, who the realtors are, and start to understand some of the strategies. Best of luck to you!