Did you know that, depending on where you live, you have a right to get your home back – even if it’s been sold in a foreclosure auction? You can. It’s known as the right of redemption law. In yesterday’s post entitled, Stop Foreclosure Help: What Happens When You Stop Paying Your Mortgage, we touched on it a little bit. Today, we explore this real estate law a bit further.
What is a Right of Redemption Law?
In the home foreclosure process, there is a period of time where the former homeowner can buy back their property from the person who bought it at auction. This period is known as the “redemption” period.
7 Things You Must Know About Right of Redemption Laws
i) Who Do Rights of Redemption Laws Apply To: When most think of redemption rights, they usually think of the homeowner who is being foreclosed on. Of course, redemption rights belong to them. However, they can also belong to any other persons or entities with a legal interest in a property, eg, the creditors of the borrower.
ii) Time Period to Buy Back Property: Right of Redemption laws vary from state to state. They can be as little as a few days on up to two years (Tennessee). Most states’ redemptive periods fall in the six months to one-year category.
iii) Specifics Vary Widely: Also, right of redemption laws have various quirks from state to state. For example:
The state of Illinois’ redemption period is seven months – from the time the foreclosure notice is filed, OR three months from the time a final foreclosure judgment is entered.
In California, the period of redemption is 3 months — if the property is sold for enough to pay off the mortgage. If the property doesn’t bring in enough to pay off the mortgage, the redemption period is 12 months.
And in Florida, the redemptive period ends once the house is sold at foreclosure. HOWEVER, it a court is allowed to “review the sale to ensure that a fair price was paid for the property.” And get this, there is no definitive time limit for a court review. Although, it usually takes place in 10 days. Ironically, this is just enough time to file the certificate of sale and for title to pass.
So it is extremely important to know right of redemption laws – as they apply in your jurisdiction. There is no one size fits all when it comes to this real estate law.
iv) Costs to Buy Back Property: Under Right of Redemption laws, the former homeowner (or other person/entity with an interest in the property) must pay back any outstanding principal due, plus interest and all other costs the lender incurred in selling the property.
v) Selling of Rights: An owner can sell his Right of Redemption to another party. For example, if I own a home, instead of exercising my right to buy it back, I can sell it to another party. If you buy my house at foreclosure, the party I sold my rights (of redemption) to can then exercise their right to buy back the property – the same as if I were the one exercising the right.
vi) Non-Judicial Foreclosure: All sales are final in non-judicial foreclosures; there is no right of redemption period. Non-judicial foreclosures take place in states where homeowners sign a Deed of Trust when the buy a home, NOT a Mortgage. For more on this, reference yesterday’s post on what happens when you stop paying your mortgage.
vii) Purchasing Foreclosed Homes: In states that have redemption laws, it can make buying foreclosures a sticky process for anyone who wants to purchase a property via this route because you don’t have clear title until the right of redemption period has passed.
On the other hand though, you as an investor can buy the redemption rights to a property, leaving you in the cat bird’s seat. So, it works both ways. In tomorrow’s post, we’ll discuss Right of Redemption Laws as they apply to real estate investors.
Facing a “Redemption Foreclosure” Process? Don’t be Bullied
Even though foreclosure laws vary by state, in most cases, a homeowner has a chance to stop the foreclosure process right up to the time of the sale. It’s important to keep this in mind because some lenders act “bullish”; using tactics to frighten buyers once they are behind.
A common tactic is to tell a homeowner that once they have defaulted, the entire amount owned on their mortgage is due. And while this is technically true, it is rarely enforced by lenders. In these times, it’s not uncommon for lenders to allow you to work out another plan, eg, a mortgage modification, give you a forbearance, etc.
Remember, as we discussed in this post on how to stop foreclosure, lenders don’t want your home. They are much better with you staying put.
List of States with Right of Redemption Laws
**Alabama: 1 year
**Alaska: 1 year
**Arkansas: 1 year
**California: 1 year
**Connecticut: Based on court decree
**Florida: 1 day or less; immediately upon sale – with judicial review
**Idaho: 1 year
**Illinois: 3 months
**Iowa: 20 days
**Kansas: 1 year
**Kentucky: 1 year
**Maine: 90 days
**Michigan: 30-36 days
**Minnesota: 6 months
**Mississippi: 30 days
**Missouri: 1 year
**New Jersey: 10 days
**New Mexico: 30 days
**North Dakota: 6 months to 1 year
**Oregon: 6 months
**South Dakota: 30 days or more
**Tennessee: Up to 2 years, unless waived at sale of property
**Vermont: 6 months to 1 year
**Wisconsin: 1 year
**Wyoming: 30 days or more
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Learn more about right of redemption laws in the video below.
Copyright © 2009 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.