In this time of economic stress, it isn’t surprising to hear that a homeowner listing his property is in foreclosure. REALTORS® and consumers alike are sometimes uncertain about whether the home can still successfully be listed and sold despite the foreclosure.
Foreclosure is the process whereby the lender (mortgage holder) attempts to take title to the property secured by a mortgage when the borrower/owner is many months behind with his or her mortgage payments. The foreclosure process is governed by Wis. Stat. Chapter 846 and generally takes four to 18 months.
When the lender obtains a judgment of foreclosure, the court confirms that the borrower is in default on the mortgage debt, that the lender has the right to have the property sold at sheriff’s sale, the time and place of the sale and whether or not the lender is seeking a deficiency judgment. A deficiency judgment holds the borrower responsible for any amounts still owed to the lender after the proceeds of the sheriff’s sale have been applied to the debt.
Right of RedemptionThe foreclosure judgment also specifies the length of the borrower’s redemption period, that is, the amount of time given to pay the entire mortgage debt and thus prevent the sheriff’s sale. The redemption period is the key factor influencing how long the listing broker has to get the property sold.
The length of the redemption period will depend upon the type and size of the property, whether or not the lender is seeking a deficiency judgment and whether the property is owner-occupied or abandoned.
For the purposes of this discussion, it is helpful to divide all properties into two general types:
- Type R foreclosures include one- to four-family owner-occupied residential properties and farms, churches and other properties owned by tax-exempt charitable organizations.
- Type C foreclosures include all other properties: commercial, retail, industrial and residential properties that are not owner-occupied or that have more than four units.
12 MonthsThe redemption period is 12 months for all type R foreclosures if the lender seeks a deficiency judgment.
Six Months
The redemption period will be six months for all type R foreclosures that are 20 acres or less if the lender is not seeking a deficiency judgment and if the mortgage was recorded after January 22, 1960. The redemption period is also six months for all type C foreclosures if the lender seeks a deficiency judgment.
Three MonthsThe redemption period will be three months for all type C foreclosures where the lender is not seeking a deficiency judgment and the mortgage was recorded after May 12, 1978.
Two Months
The redemption period will be two months in all cases where the property is abandoned. The lender must prove that the owner has relinquished possession and control of the property, not just that it is simply vacant. For example, if a property is listed for sale, the property may be vacant, but the owner is still exercising possession and control via the efforts of the listing broker marketing the property.
The period of redemption is an important factor to be considered by a broker listing a property for sale and for a broker with a buyer for the property. It roughly indicates how long the brokers have to get the property sold and closed for a price that will pay off the owner’s total mortgage debt and stop the foreclosure.
The final deadline for getting the property sold and closed, however, extends beyond the redemption period. Rather, the right of the owner to redeem the property by paying off the total amount due to the lender lasts until judicial confirmation of the sheriff’s sale. It is only then that title to the property passes to the purchaser.
REALTOR® Practice Tip: The property owner may redeem his or her property by selling the property and paying off the foreclosure judgment before judicial confirmation of the sheriff’s sale. The property still belongs to the owner and the owner can still sell until then.
WRA Foreclosure Resources
Debbi Conrad is Director of Legal Affairs for the WRA.