My wife and I are moving to Savannah, Georgia, and we want to live in a specific neighborhood. There aren’t many homes for sale there, but I just found out there's a house being foreclosed on our favorite street. We’re extremely interested, but also concerned about buying a foreclosed home, for a couple of reasons. The main worry we have is that we read the homeowners may be able to get the house back even after the foreclosure by “redeeming” it. Could this really be true?
No, the former homeowners cannot get the house back after a foreclosure in Georgia. (In some other states, the homeowners can repurchase or “redeem” the home after losing it in foreclosure by reimbursing the party who bought it at the foreclosure sale for the full purchase price, plus various other costs. Georgia law has no such provision, however.)
It is possible, though uncommon, for the IRS to redeem and take the home away from the new buyer after the foreclosure sale if there was a federal tax lien on the property. We’ll describe below how this could affect your ability to settle into your new home without worrying that you’ll eventually lose it.
The Homeowners Can’t Redeem After a Foreclosure Sale in Georgia
Georgia law does not provide the former homeowners with the right to redeem after a foreclosure sale.
The IRS Can Redeem If There’s a Federal Tax Lien on the Property
Under federal law, the IRS gets 120 days to redeem the house after a foreclosure sale if there was a federal tax lien on the property -- though redemption does not happen very often. (The IRS would redeem only if it believed that it could later sell the property for more than you bought it for at the foreclosure sale.)
The IRS’s right to redeem automatically expires if it does not take action within the 120-day time period (called a “redemption period”). Sometimes, the IRS may agree to release its right to redeem before the redemption period expires if you submit an application and, in some cases, pay a fee.
How Much the IRS Must Pay to Redeem
If it decided to redeem the home, the IRS would have to pay you the amount you paid at the foreclosure sale, plus:
- 6% interest from the sale date
- any amounts you paid to the holder of a senior lien, and
- any amounts you paid for necessary repairs, such as buying new locks for security purposes.
If the IRS did take steps to redeem, you would first learn about it when the IRS sends you a notice to inform you that it is considering redeeming the home.
What Else to Consider When Buying a Foreclosed Home
Besides knowing that the IRS could redeem if it has a lien on the home, there are a few other things you should be aware of if you’re planning on buying a house at a foreclosure sale.
For starters, you won’t get any seller disclosures about the condition of the property before the foreclosure sale takes place. In addition, you’ll have to purchase the property “as is,” without the ability to negotiate repairs. Since the owner was in financial distress, this could mean that the home will need some significant restoration. (Learn more in Nolo’s Buying Foreclosed Properties area.)
Finding Georgia’s Foreclosure Laws
To find the statutes that discuss foreclosure sales in Georgia, go to Title 44, Chapter 14 of the Georgia Code.