Under Wisconsin foreclosure laws, foreclosures are judicial, which means a foreclosing party, usually the lender, must file a lawsuit in court in order to foreclose. Typically, Wisconsin foreclosures take about 12 months even if the foreclosure is uncontested, but the pre-foreclosure and redemption processes can extend the overall timeline.
Investors should be aware that Wisconsin, like most states, may enact foreclosure and/or eviction moratoriums in response to public health threats or widespread financial crises. For example, in 2020, in response to the COVID-19 global pandemic, the state enacted a temporary ban on both foreclosures and evictions. Real estate investors must check all foreclosure forbearance and eviction moratorium guidance in the state and locally when planning to buy Wisconsin foreclosures and prior to implementing eviction procedures.
The Wisconsin pre-foreclosure process begins when the servicer attempts to contact the homeowner about delinquent loan payments and options for avoiding foreclosure. However, most real estate investors consider pre-foreclosure to start when a homeowner first misses a mortgage payment, since this is the beginning of the mortgage delinquency and frequently the time at which a homeowner first begins to consider selling their property.
In Wisconsin, as in most states, lenders are usually required to wait until payment is 120 days delinquent to begin the foreclosure process. If the homeowner applies for loss mitigation during this 120-day period, the loan servicer cannot begin the official foreclosure process until the loss-mitigation period has expired, the homeowner has violated one of the terms of the loss-mitigation or loan-modification agreement, or the homeowner has been notified they are not eligible for loss mitigation.
Wisconsin has a state foreclosure mediation network to help loan servicers and homeowners facing foreclosure come up with solutions and foreclosure alternatives. Typically, these alternatives may include:
Real estate investors who want to buy Wisconsin foreclosures should be aware of these programs since they may represent a potential path to purchase of the property. Also, the foreclosure may be delayed in the event that a lender or loan servicer fails to attach notice of availability of the foreclosure mediation network and an application for mediation to foreclosure suit.
A Wisconsin foreclosure begins when the lender files a summons and complaint in court. If the lender plans to seek a deficiency judgment, this information must be included in the complaint. Although it is not mandatory under Wisconsin foreclosure laws, many mortgage note terms require the lender to also file a Lis Pendens document that identifies the property and describes the foreclosure. This document serves as public notice of foreclosure.
If the borrower does not respond to the court action, a lender may request and receive a default judgment granting permission to sell the property at a Wisconsin foreclosure sale. In the event that a homeowner does respond and contest the foreclosure, the case goes through litigation. However, the lender may request a summary judgment if the case’s “critical aspects” (such as delinquency and how much is owed) are not in dispute. The court may order in its ruling that all sums paid by the lender for insurance, repairs, and taxes be added to the amount owed.
Once the court has issued a judgment of foreclosure, the borrower has a reinstatement period to stop the foreclosure by paying off the amount owed. The reinstatement period varies widely based on the mortgage date and terms, parcel size, and occupancy status. Abandoned properties have a two-month redemption period, while most other properties have 6-12 months.
The local sheriff gives notice of the time and place of sale either according to the law or as instructed in the court’s ruling. In most cases, the foreclosure sale cannot occur until after the owner’s reinstatement period is completed. The notice of sale is published within that 12-month period, although the first publication has to be at least 10 months after the date the court’s ruling is entered. The parties may consent to an earlier sale.
The sheriff conducts the foreclosure sale, and any party with 10 percent of their maximum bid at the sale may bid. The 10 percent amount must be payable to the county sheriff. Within 10 days, the sheriff files a report of the sale and deposits the proceeds with the clerk of the court. Due to public health policies, there may be some occasions upon which a Wisconsin foreclosure sale cannot be conducted in person. In these cases, the foreclosure sale may be postponed, as happened frequently during the COVID-19 global pandemic in 2020, or may take place on a digital platform. The sheriff’s office is the best source of information about the auction platform.
Upon confirmation of sale, the clerk pays the parties entitled to the sale proceeds and delivers the deed transferring ownership to the highest bidder, who must pay the balance of the sale price. If the buyer fails to pay the balance of the sale price within 10 days after the confirmation of sale, the deposit is forfeited, paid to the entitled parties, and a resale is held. If the court does not confirm the sale, the clerk refunds the buyer’s deposit and a resale occurs.
In the case of a surplus, other affected lien holders may file a notice with the clerk of the court, and the court determines who is entitled to any or part of the surplus.
If the property sells for less than the default amount and sale costs, the sale will not be confirmed and no judgment for deficiency rendered until the court is satisfied that the fair value of the property has been credited on the mortgage debt, interest and costs.
Under Wisconsin foreclosure laws, homeowners do not have the right, post-foreclosure sale, to redeem their property. However, Wisconsin does permit a potentially lengthy redemption period before the sale that is governed by factors including whether the borrower abandoned the home and whether the lender is seeking a deficiency judgment. The Wisconsin pre-sale redemption period begins at the time that the lender gets a foreclosure judgment from the court.
There are a variety of factors governing the Wisconsin foreclosure redemption period:
In order to redeem a Wisconsin foreclosure home, the borrower must pay:
Wisconsin borrowers may also reinstate their loans by refinancing the property and paying off past-due amounts or by successfully obtaining a loan modification.
Wisconsin foreclosure laws permit deficiency judgments if the lender demands the judgment in the initial foreclosure complaint and the foreclosure sale price is less than the fair market value of the property. In this event, the deficiency judgment must be for no more than the difference between the outstanding debt on the property and the fair market value (FMV) of the property. Foreclosing parties may elect to waive their right to a deficiency judgment in order to expedite Wisconsin’s lengthy pre-sale redemption period process.
In some cases, when you buy Wisconsin foreclosures you will find that the foreclosed homeowner has remained in the property after sale. New owners may offer residents “cash for keys,” wherein the new owner provides residents with some amount of money in exchange for a smooth, timely exit, or they can follow the process for a formal eviction. Real estate investors must remember that Wisconsin foreclosure laws deal with tenants living in a foreclosed home and former homeowners living in a foreclosed home differently.
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