Here is the Wiki definition….
The right of redemption, in the law of real property, is the right of a debtor whose real property has been foreclosed upon and sold to reclaim that property if they are able to come up with the money to repay the amount of the debt. Most U.S. states have a statutory provision that allows such a reclamation of property.
Christina’s breakdown:
- If the mortgage was created before January 1, 2016, the right of redemption period is one year, for all real property.
- If the mortgage was created on or after January 1, 2016, the right of redemption period is six months for a homesteaded property.
- Who can redeem? Debtors, Mortgagors. Junior mortgagees, or transferees. Judgment creditors, or transferees. Transferees of the interests of the debtor or mortgagor, either before or after the sale. Spouses of debtors, mortgagors or transferees of a debtor or mortgagor, if married on day of foreclosure sale. Children, heirs or devisees of a debtor or mortgagor.
- In 15 years I have only seen one piece of land redeemed by a family in Mountain Brook, AL.
- If you want to redeem your property, be prepared to pay the loan amount you owe, bank fees, attorney fees and interest
Purchasing a Foreclosure with a Right of Redemption.
What do you need to know?
First thing to do is ask your Realtor® for a copy of the foreclosure deed. They can ask the Listing broker for a copy of this. You need to know what the foreclosure date is and what year the mortgage was created because you need to know if there is 6 months right of redemption or 12 months.
Example: Foreclosure date was 7/1/2019 and the mortgage was created on 2/2/2010. Then the right of redemption will expire on 7/1/2020 because the mortgage was created before 2016.
If you purchase a home with a right of redemption make sure you only do “necessary” repairs to the house until the redemption expires. Adding a pool is not a necessary repair. Replacing a damaged roof is a necessary repair. Also, make sure you keep all receipts and invoices. You need to make sure you keep everything incase the property is redeemed, so that you are refunded.
Second thing you need to know on the foreclosure deed is the foreclosed amount. This is important if you are getting a loan. Your lender will require you (or seller can pay for it) to purchase a redemption bond. This is 1% of the purchase price. You will only need to get a redemption bond if your purchase price is MORE than the foreclosed amount.
Example: Foreclosed amount on deed is $145,578 and your purchase price is $180,000. Your lender will require you to get a redemption bond for $1800. You can negotiate this with the seller.
Make sure your Realtor® has worked with foreclosures and understands the process. Especially being able to read a foreclosure deed.
Remember:
- Get a knowledgable Realtor® to represent you when dealing with foreclosures
- Ask for a copy of the foreclosure deed
- Be ready to possibly pay for a redemption bond or negotiate with the Seller.
If you have more questions or concerns give me a call! I am not an attorney FYI. If you need legal advice please ask a good Real Estate Attorney.
Christina Kallaher
205-427-7722
Realtor®
Kallaher Group w/ Lucas & Associates
