Residential properties are foreclosed upon for two main reasons: mortgage delinquency or tax delinquency. “Real property tax delinquency entails a three-year forfeiture and foreclosure process in Michigan. Parcels are forfeited to the county treasurers when the real property taxes are in the second year of delinquency. Real property taxes which remain unpaid as of March 31 in the third year of delinquency are foreclosed upon” There is a redemption period after the foreclosure. This redemption period allows the foreclosed-upon owner to pay the back taxes plus fees and interest. This time period is around one year, but the exact time period depends on when the property was foreclosed upon.
Once the property has gone through tax foreclosure, the county issues a deed pursuant to Act 123 of 1999. The purchaser has a deed to the property but may run into problems when he or she wishes to sell the property. A title company will refuse the property deed because they may deem that the deed is not clean. The concern from a title company standpoint is that the prior owners- upon whom the property was foreclosed- may pop up in the future to claim that the foreclosure was improper or that the prior owner died and there was a deficiency in the foreclosure process according to his/her heirs. The end result of these prior owners or heirs popping up is that the property may be ordered to be returned to the prior owner or heirs. Thus, the foreclosure purchaser could lose out on the entire purchase price of the property.
The main method to extinguish these claims and get clear title for the title company is an action to quiet title. This is an action in the circuit court in the county where the property is located. This litigation involves a complaint describing the circumstances by which the property was required, legal description of the property, and a request to grant clear title to the foreclosure purchaser. Like most civil actions, the complaint must be mailed to the foreclosed upon prior owner. If that owner does not respond, a motion for entry to default may be granted. Alternatively, the prior owner may respond, and the court will resolve the matter. Typically, the prior owner does not contest the complaint, and the new owner is granted an entry of default. Once the order from the court gives clean title to the foreclosure purchaser, the title company may proceed with the sale.