My husband and I live in Anchorage, Alaska, and have been having trouble finding a home to buy in the area we like. I just heard that there's a house being foreclosed in the neighborhood where we're hoping to live. We’re very interested, but also worried about buying a home at a foreclosure sale. I heard that the homeowners might be able to get the house back even after the foreclosure. Is this right? Could this really happen to us after we've purchased the property and moved in?
Yes, it is possible, although rare, for Alaska homeowners to get the home back after the foreclosure. They would do so by paying you the purchase price you paid at the foreclosure sale, plus various other charges. This is called redeeming the property.
However, foreclosed homeowners in Alaska get the right to redeem the property only:
We’ll describe below what these different types of foreclosures are and how Alaska’s redemption laws might affect your ability to settle into your new home without fearing that you’ll eventually lose it.
Most residential foreclosures in the state are nonjudicial, which means the lender does not have to go through state court to foreclose. Judicial foreclosures, in which the lender files a lawsuit in court, are also possible.
Does the distinction between a nonjudicial and a judicial foreclosure matter to you as a prospective buyer at a foreclosure sale? Not really, except to the extent that it affects the redemption period. As you’ll see below, if the foreclosure is nonjudicial it’s likely that the former homeowner won’t have the right to redeem the property, which is good news for you.
How to find out if the foreclosure is nonjudicial or judicial. One way to find out which type of foreclosure process the lender is using is to go to www.zillow.com. You’ll first need to sign up for a free account and log in, otherwise you won’t be able to view all of the foreclosure information. Find the home by entering the address in the search box. This pulls up a map of the neighborhood. Then click on the home’s address, which is a link to its webpage. Scroll approximately one-third of the way down and click on “More foreclosure information.” This will tell you if the foreclosure is nonjudical or judicial. (If you want to call someone to get information about the foreclosure, you can typically find the name and phone number of the foreclosure trustee or attorney on this screen as well.)
You can also check the foreclosure sale notice in your local newspaper. If a “trustee” (a third party that administers nonjudicial foreclosures) is selling the home at a trustee’s sale, this means the foreclosure is nonjudicial. (Sometimes foreclosure notices are also available online at the newspaper’s website.)
In Alaska, the foreclosed homeowners can't redeem the property after a nonjudicial foreclosure, unless the deed of trust that they signed when taking out the mortgage loan specifically provides a right of redemption (Alaska Stat. § 34.20.090(a)). (Learn more about the difference between a mortgage and a deed of trust.) Alaska deeds of trust typically do not provide the homeowners with a right to redeem.
To find out what the deed of trust says, you can:
If the foreclosure is judicial, the homeowners may redeem the property within 12 months after the court confirms the foreclosure sale to you (Alaska Stat. § 09.35.250). If they don’t redeem within this timeframe (called a redemption period), they forever lose the chance to get the home back this way.
In order to redeem the property, the foreclosed homeowners would have to pay you the amount you paid at the foreclosure sale, plus all allowable charges such as:
You can see why redemption is so rare. A homeowner who, perhaps no more than a year ago, was unable to keep up on the home’s mortgage payments would have to turn around and come up with not only the purchase price, but additional amounts to cover interest and your expenses.
If the foreclosed homeowner did take steps to redeem, you would probably first learn about it when a peace officer notifies you that they have redeemed the home.
It’s also possible, but exceedingly rare, for some other party to redeem the property, such as other creditors who had liens on the home. These parties get 60 days to redeem (Alaska Stat. § 09.35.220, § 09.35.230).
Another very rare possibility is the IRS redeeming the property after a judicial or nonjudicial foreclosure, if there was a federal tax lien on the home. The IRS gets 120 days (or the allowable period under state law, whichever is longer) to redeem. If the IRS considers redeeming the house, it would send you a notice beforehand.
If you purchase the home at the foreclosure sale, you are entitled to the possession of the property -- that is, to move in and live there -- from the time of sale until redemption, if one occurs (Alaska Stat. § 09.35.310).
Besides the possibility of redemption, there are other issues to take into account when considering buying a home at a foreclosure sale. For example, you won’t get any seller disclosures regarding the condition of the property before the sale, and you will have to purchase the property “as is,” without negotiating over repairs. And the fact that the owner was in financial distress means the property could be in bad condition. (Learn more in Nolo’s Buying Foreclosed Propertiesarea.)
To find the Alaska statutes, go to the Alaska Legislature’s webpage. Click on “2013 Alaska Statutes” to find the table of contents. The statute that discuss the right to redeem after a nonjudicial foreclosure can be found in Title 34, Chapter 34.20 (Mortgages and Trust Deeds). The statutes pertaining to the redemption period after a judicial foreclosure can be found in Title 9, Chapter 09.35 (Execution).