Redemption and Deficiency

Sellers facing foreclosure in Michigan have it better than any other state, as Michigan is a Redemption state. This means even once a foreclosure sale (sheriff sale) has taken place, the seller has the legal right to live in the home for 6 months to 12 months mortgage free (depends on amount of acreage attached with the home). This statute provides home owners in default the ability to redeem the property back in good standing. This way, property owners are afforded every opportunity to seek alternatives to foreclosure during this redemption period.

Michigan is also a Deficiency State. Being as such, a debtor or borrower who does not produce sufficient funds to pay the mortgage balance in full or negotiates terms to "satisfy" the loan, then the creditor has the right to pursue or sell the debt for 7-10 years. Many homeowners do not realize this applies to foreclosures, short sales and deeds in lieu unless specific language expressly states the loan has been satisfied or cancelled. Otherwise a deficiency judgment can be placed on your credit or this deficiency amount can be sold to a collection agency. Typically a deficiency judgment, until this is paid off, will not allow another home purchase through a lender.

This does not mean that the lender WILL pursue the debt, but provides them the right to. As of right now, every state except California and Oregon are deficiency law states.