Minnesota Real Estate Investors Association, Inc.

The Foreclosure Process in Minnesota: A Guide for Real Estate Investors

By: Loreal Loftus

Minnesota has a very specific foreclosure process that real estate investors must understand to spot opportunities, evaluate deals, and navigate legal timelines. Whether you’re looking for wholesale opportunities, fix-and-flips, or buy-and-hold investments, knowing the process can help you make informed and profitable decisions.

1. Understanding Foreclosure in Minnesota

In Minnesota, foreclosures are typically handled through a non-judicial process called foreclosure by advertisement. This means the lender can foreclose without going through the court system, provided they follow statutory notice requirements. In some rare cases, a judicial foreclosure is used, which involves court proceedings.

2. Step-by-Step Foreclosure Timeline in Minnesota

Step 1: Missed Payments

• The process begins when a borrower misses one or more mortgage payments.
• Most lenders send a Notice of Default or Demand Letter after 30–60 days.
• Investors should start prospecting at this stage — sellers may be open to creative solutions like subject-to or short sales.

Step 2: Pre-Foreclosure Period

• Before the foreclosure sale is scheduled, the borrower may receive multiple notices and opportunities to catch up on payments.
• The lender must publish a Notice of Mortgage Foreclosure Sale in a qualified newspaper for six consecutive weeks and send notice to the borrower by mail at least four weeks before the sale.
• Investors can approach homeowners during this period with purchase offers, reinstatement help, or lease-back options.

Step 3: The Foreclosure Sale (Sheriff’s Sale)

• The property is sold at a public auction conducted by the county sheriff.
• The highest bidder (often the lender) wins the property.
• If the lender takes the property back, it becomes REO (Real Estate Owned).
• Investors can attend sheriff’s sales, but all due diligence must be done beforehand as sales are “as-is” and typically require cash.

Step 4: Redemption Period

• After the sheriff’s sale, Minnesota law provides a redemption period during which the homeowner can reclaim the property by paying the full sale price plus fees.
• Typical redemption periods:
• 6 months for most properties.
• 12 months if the property is large (over 40 acres) or more than 1/3 of the original mortgage is paid.
• 5 weeks for abandoned properties.
• Investors can negotiate directly with homeowners during this time for redemption rights or to purchase subject-to existing financing.

Step 5: Eviction (If Necessary)

• If the homeowner does not redeem and refuses to vacate, the new owner must go through a formal eviction process.
• Investors should budget for legal and holding costs if planning to occupy, rent, or rehab the property immediately after redemption expires.

3. Key Considerations for Investors

• Title Searches: Always verify liens, taxes, and title issues before bidding or buying.
• Cash Requirements: Sheriff’s sales generally require full payment in certified funds within a short period (often the same day).
• Access Issues: You may not be able to inspect the interior before purchasing.
• Creative Opportunities: Pre-foreclosure is often the best time to create win-win deals that help the seller avoid foreclosure while securing a profitable investment.

4. Minnesota Investor Strategies

1. Pre-Foreclosure Marketing
   Target homeowners as soon as the Notice of Default is filed — you may secure deals before they hit public auction.
2. Bidding at Sheriff’s Sales
   Requires quick cash and strong due diligence but can yield deep discounts.
3. Buying During Redemption
   Negotiate with owners to take over redemption rights — especially for abandoned or distressed properties.
4. Post-Foreclosure (REO) Purchases
   Work directly with banks or their REO agents to acquire properties they’ve taken back.

5. Legal & Ethical Considerations

• Comply with Minnesota Statutes Chapter 580–582 regarding foreclosure sales and redemption.
• Use clear, written agreements with homeowners to avoid misunderstandings.
• Avoid “equity stripping” practices that could violate state homeowner protection laws.
• Always advise sellers to seek independent legal counsel.

Conclusion

Understanding Minnesota’s foreclosure process gives real estate investors a powerful advantage. By learning the legal timelines and knowing when to approach distressed homeowners, you can create opportunities that are profitable while also helping families avoid the worst impacts of foreclosure.

If you want to network with other Minnesota foreclosure investors, share leads, or learn advanced creative strategies, join us at Minnesota Real Estate Investors Association (MnREIA).

📅 Visit www.MnREIA.com to see our upcoming events and workshops.