Right of Redemption with Real Estate

The right of redemption is the right of a property owner to redeem his or her real estate from foreclosure by paying the lender the outstanding principal and interest due, plus the lender's costs in foreclosure, or to redeem foreclosed real property from whoever purchased it at the foreclosure sale. It can vary from state to state on how long the owner has after the property goes to auction, exactly what has to be paid, and even what the process is called. There are two key reasons why a foreclosure investor needs to be familiar with the right of redemption. One is that you need to know when you buy a property at auction whether or not the owner can get the property back if he somehow comes up with sufficient funds (typically the outstanding balance, accrued interest, late fees and costs). The second is that you may be able to buy the redemption rights whether or not you actually buy the property. Protecting your investment In states that provide the right of redemption after the foreclosure auction, you want to be sure you're not going to be faced with a situation where you buy the property, spend time and money fixing it up and putting it on the market, then have the owner (or another investor who has purchased the redemption rights) take the property and your potential profits away from you. The redemption period is set by state law and typically ends at some point before the sale or up to a year after the sale. If the redemption period in your state ends before or at the sale and you buy the property at auction, this shouldn't be an issue. But if the owner has weeks, months, or even up to a year or more after the auction to redeem the property, you have a level of uncertainty that most investors would find unacceptable. Most people who lose a house in foreclosure aren't likely to have the means to redeem it later, but circumstances can change and financial windfalls do happen. Also, because most of the secondary liens are wiped out with the foreclosure, it's possible that the owner could put himself in a better financial position by waiting until after the foreclosure to redeem the property rather than trying to pay those debts and stop the foreclosure. Please see FHA guideline attached below If the property was acquired by foreclosure, the acquisition date is the date the lender acquired full rights to the property. The Decisioner must review and approve documentation to support the date of acquisition. This documentation may include, but is not limited to: a copy of the property sales history report, a copy of the property tax bill, the title commitment or binder demonstrating the seller's ownership of the property and the date it was acquired, or documentation issued by the Court or by the Sheriff. The document(s) must validate the date the lender attained full rights to the property after a redemption period has expired, if applicable.
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