I recently moved to Delaware and want to buy a house, but I don’t like anything that is on the market. I just found out that there is a house being foreclosed in the neighborhood that I like. From the outside, at least, it looks great. I’m thinking about bidding at the foreclosure sale to buy the home, but I’m worried. I heard that the homeowners might be able to get the house back even after the foreclosure sale. Is this for real? Can the homeowners take the home away from me after the foreclosure sale?
Delaware homeowners who've been foreclosed on can get their house back after someone has bought it at a foreclosure sale by paying off the full amount of the unpaid loan plus certain additional amounts. This is called “redeeming” the home. However, this may not be as big a problem for potential buyers like you as it sounds like, because they would have to redeem the house before the court confirms the sale to you.
We’ll describe below how Delaware foreclosures work and how the process might affect your ability to feel secure about your foreclosure home purchase.
The Homeowners’ Right to Redeem the Home
Delaware foreclosures are judicial, which means after the homeowner defaults on a mortgage, the lender must file a lawsuit in court to foreclose the home. Once the foreclosure sale takes place, the court must confirm it in order to complete the process. This usually occurs 30 to 60 days after the sale date.
The foreclosed homeowners could redeem the home after the sale, but they would have to do it before the court confirms the sale to you. Once the sale is confirmed, they forever lose the chance to get the home back this way.
How Much the Foreclosed Homeowners Must Pay to Redeem
In order to redeem the house, the foreclosed homeowners would have to pay the total debt, plus all other lawful charges such as interest, attorney fees, and costs.
Redemption rarely occurs, and you can see why. A homeowner who, not long ago, was unable to keep up on the home’s mortgage payments would have to find a way to come up with not only the full amount of the unpaid loan, but additional amounts to cover interest, fees, and costs -- and all within about 60 to 90 days.
If the foreclosed homeowner did take steps to redeem, you would probably first learn about it when the court notifies you that they have redeemed the home.
Can the IRS Redeem for Tax Liens?
It's possible, but not common, for the IRS to redeem the property after a foreclosure if there was a federal tax lien on the home. The IRS gets a 120-day redemption period. If the IRS considers redeeming the house, it would send you a notice beforehand.
Other Things to Think About When Buying a Foreclosed Home
Besides the possibility of redemption, there are other issues to consider if you're thinking of buying a home at a foreclosure sale. The property may look good from the outside, but could be in poor shape inside -- an owner who couldn't pay the mortgage probably couldn't afford maintenance, either. And you won’t get any seller disclosures regarding its condition before the sale, as you would with a regular, non-foreclosure sale.
Moreover, you will have to purchase the property “as is,” without negotiating over repairs. (Learn more in Nolo’s Buying Foreclosed Properties area.)
Finding Delaware’s Foreclosure Laws
To find the statutes that discuss foreclosure sales in Delaware, go to Title 10, Chapter 49, Subchapter XI of the Delaware Code.