How does a person's home get to foreclosure?

The word foreclosure is thrown around daily, without much thought on how a person's home gets there.
So you ask, how does a property go through foreclosure?
Foreclosures in Minnesota are typically non-judicial and are commonly called 'foreclosure by advertisement'.  Here is a breakdown of this process within the state of Minnesota, keeping in mind that each state is different.

Once you become 90 days late on your mortgage, your lender/servicer can legally file that you are in default on your mortgage.  Most mortgages have a 'power of sale' clause written within them which permits the mortgagee to sell the property that secures the mortgage loan where timely payments have not been made.  The lender/servicer hires a foreclosure attorney to begin this power of sale process.  The attorney drafts a demand letter and sends via US mail to the last known address of the mortgagor(s). 
This demand letter will tell you the total amount owed (including processing and attorney fees) to bring your account current and that you have 30 days to cure the default.  At this point, you must pay the total amount owed (unless otherwise noted).  If you ignore this letter (or can not pay), the attorney then schedules the sheriff's sale and proceeds with the required 6 week public notice and 4 week private notice.
Public notice is that of publishing a notice of foreclosure sale date in a general circulatory newspaper in the county where the property resides.  Private notice is that of a letter to the occupants/owners of the property 4 weeks ahead of the sale, 8 weeks if the home is homesteaded.

The sheriff's sale is more like an auction, where the property is sold to the highest bidder (including the bank).  After the sheriff's sale, there is a statutory 6 month right of redemption period where a mortgagor can redeem the loan (by paying the entire balance in full + costs incurred during the redemption period) or negotiate a short sale with their lender.  The redemption period is 12 months if the amount due is less than 2/3 of the prinicpal balance and property exceeds 10 acres or if the property exceeds 40 acres.  One can shorten the redemption period by court order to 5 weeks if the property has been abandoned.

Once the redemption period has ended, the property immediately transfers ownership to the winner of the sheriff's sale bid (almost always the lender that foreclosed upon).  This new owner must go through the process of evicting the occupants/owners of the home, paying special attention to what type of occupants are in the home currently.  Minnesota law recently changed where the owner must now give a tenant 90 days to vacate and can not evict this tenant until the 90 days are up.

After reviewing this timeline, you can see that there is plenty of time and opportunity to try and negotiate a short sale on your home.  While it is possible to negotiate during the redemption period, there are some lenders/servicers that do not allow short payoffs during redemption.  Please check with your lender/servicer before putting your home on the market as a short sale to ensure this is possible. 

Also, it is very possible to postpone a sheriff's sale with your lender/servicer so long as you have an offer presented for review and there is enough time for the attorney to postpone said date with the sheriff (best to request 1 week ahead of time).  The longer it takes to put the home on the market, the less likely it will be possible to secure an offer in time to negotiate with your lender/servicer.  Negotiating short sales can take anywhere from 30-120 days, so the sooner you get the home on the market the better chances you will have to negotiate and close before the end of redemption.