Has anyone heard about foreclosures lately? I don’t want to beat a dead horse but wanted to point out a little discussed court case regarding when an owner under a foreclosure action can redeem and sell the property.
Has anyone heard about foreclosures lately? I don’t want to beat a dead horse but wanted to point out a little discussed court case regarding when an owner under a foreclosure action can redeem and sell the property.
Under §846.13, Wis. Stats., as interpreted by the courts, an owner under a foreclosure action can redeem and sell the mortgaged premises at any time before the confirmation of sale by paying the full amount due to the lender, including costs (the confirmation of sale is when the judge reviews the case to determine if the sale at the sheriff’s sale was for “fair value” and does not “shock the conscience” and, if so, the judge will confirm the sheriff’s sale). Thus, even after the Sheriff has “sold” the property at the sheriff’s sale, the owner of the property may redeem and sell the property to a 3rd party if the owner pays the outstanding sums due to the lender before the judge confirms the sale (timing is a major issue – once the judge’s gavel is down confirming the sale, the owner is sunk).
Caveat– a sale by an owner after the sheriff’s sale and before confirmation must result in the lender receiving 100% of what is due – i.e. no short-sales.
In M&I Marshall & Ilsley Bank v. Kazim Investment, Inc., 2004 WI App 13 (dated and filed December 23, 2003), the property was bought at a sheriff’s sale for $273,000. M&I was not pleased with $273,000, which would have left M&I with a deficiency of almost $400,000, so M&I negotiated a plan of redemption with the borrower/owner and filed a motion to set aside the sheriff's sale based on the plan of redemption. However, the plan of redemption did not provide for immediate full payment; instead, it established a plan for full payment of the negotiated price within six months. The purchaser at the sheriff’s sale was upset and argued that “…Wis. Stat. §846.13 does not allow a party to redeem a foreclosed property by hoping to be able to pay the judgment amount at a later date or promising to make such a payment." The Court of Appeals agreed stating “…judicial confirmation is analogous to the execution of a judgment and simply enforce[s] the parties' rights which have been adjudicated…. Here, Wis. Stat. §846.13 provides ‘a `clear and valid' legislative command,’ removing a circuit court's discretion to alter the clear and unambiguous prerequisite of full payment for redemption before the sale.” (internal citations omitted). The Court of Appeals reversed the order of the circuit court granting M&I’s motion to set aside the sheriff’s sale and remanded the case.
The result – caution to all those who buy a property in foreclosure after sheriff’s sale and before confirmation if the foreclosing lender does not receive 100% – if the purchaser at the sheriff’s sale objects the person who bought the property from the owner may lose the property.
To respond, if the sale is a short-sale after the sheriff’s sale and before confirmation, Knight-Barry will include the following requirement in Schedule B-I of its title commitment:
Order of the circuit court that vacates the sheriff's sale and confirms that, as a result of the order vacating the sheriff's sale, the purchaser at the sheriff’s sale has no right, title or interest in the property.