I recently relocated from Connecticut to Maine for my work. I’ve been looking for a house to buy and found a great one online that is in foreclosure. I’m seriously considering making a bid on it at the foreclosure sale, but I read on the Internet that homeowners in Maine get 90 days to redeem the home. As I understand it, this means they can get the house back after the foreclosure by paying off the mortgage. How does this work? I don't want to buy a house only to lose it!
Homeowners in Maine do get a 90-day "redemption period" (during which they can pay off the loan and keep the house) but it occurs before the sale, so it won’t affect you if you buy the house. Assuming you’re the winning bidder, you’ll get a deed to the home following the foreclosure sale.
On the other hand, it is possible, though not likely, for the IRS to redeem the home after the foreclosure, but only under certain circumstances. Read on to learn more about when the IRS might take the home away from you after the sale and how often this occurs.
When a homeowner fails to pay his or her federal income taxes, the IRS typically records a Notice of Federal Tax Lien in the land records. If that lien is foreclosed, the IRS gets 120 days to redeem the house under federal law. To redeem the home, the IRS would have to pay you the amount you paid at the foreclosure sale, plus interest (at a rate of 6% from the sale date) and various other amounts.
The right to redeem will expire if the IRS fails to act during the 120-day time period. (If you want, you can request that the IRS release its right to redeem before the redemption period expires.)
The IRS does not redeem foreclosed properties too often. This is because the IRS would only choose to redeem if it believed that it could later sell it for more than you paid at the foreclosure sale. If the IRS did decide to redeem, you would first learn about it when you receive a notice telling you that the IRS is considering redeeming the home.
If you’re thinking about bidding on a home at a foreclosure sale, there are a few other potential challenges that you should be aware of when it comes to purchasing a home this way.
For one thing, you won’t get any seller disclosures. In a regular home sale, these disclosures are your opportunity to learn as much as you can about the property before the sale is finalized. However, with a foreclosure sale, there are no disclosures.
On top of that, you must buy the home “as is,” without being able to request any repairs. Since the homeowners were in foreclosure, this could mean that they didn’t have enough money to properly maintain the home and it could need significant work. (Learn more in Nolo’s Buying Foreclosed Properties area.)
To find the statutes that discuss the homeowners’ right to redeem a home in Maine, go to Title 14, Chapter 713 of the Maine Revised Statutes.