I live in a condo in Minneapolis, Minnesota, but I want to buy a house. I’ve been looking at places online and found a house that I like that is in foreclosure. I’m thinking about bidding on it at the foreclosure sale, but I’m a little uneasy. Based on what I’ve read, the owners can get the house back even after I buy it. How does this work?
Foreclosed-upon homeowners in Minnesota can get the home back after the foreclosure by paying you the purchase price you paid at the foreclosure sale, plus certain other charges, within a limited period of time. This is called a redemption period.
In a nutshell, Minnesota homeowners get a five-week, six-month, or 12-month redemption period. (This is explained in more detail below.) Most homeowners get six months. The main effect on you is that you’ll have to wait until the redemption period expires before you can move into the house.
You should also be aware that another party, such as a creditor or the IRS, may be able to redeem the property as well.
How Long the Homeowners Have to Redeem After the Foreclosure Sale in Minnesota
In Minnesota, the homeowners can redeem the home after the foreclosure sale within:
- six months (in most cases) or
- 12 months (under certain circumstances, like if the property is larger than 40 acres) (Minn. Stat. Ann. § 580.23, § 581.10).
If the homeowners abandoned the house or elected to postpone the sale, the redemption period is five weeks (Minn. Stat. Ann. § 582.032, § 581.10, § 580.07).
How to Find Out the Length of the Redemption Period
To find out the length of the redemption period before you purchase the home, you can check the notice of foreclosure sale that was published in the local newspaper as part of the foreclosure process. You can sometimes find these online.
The sheriff’s certificate of sale (which you’ll receive if you’re the high bidder at the sale) will also typically state the redemption period.
How Much the Foreclosed Homeowners Must Pay to Redeem
In order to redeem the property, the foreclosed homeowners must pay you the full price you paid at the sale, plus interest and certain costs (Minn. Stat. Ann. § 580.23, § 581.10).
Homeowners typically aren’t able to come up with the financing to redeem a foreclosed home. (Since the homeowners’ credit score dropped significantly during the foreclosure process, they most likely won’t be able to qualify for a new mortgage.)
The IRS May Redeem If There is a Federal Tax Lien
It’s also possible, but rare, for some other party to redeem the property, such as:
- creditors who had liens on the home, or
- the IRS (if there was a federal tax lien on the home).
The IRS gets a 120-day redemption period (or the allowable period under state law, whichever is longer). However, the IRS doesn’t redeem foreclosed homes very often. It would only do so if it could later sell the home for more than you paid at the foreclosure sale.
If the IRS does consider redeeming the home, it will send you a notice of its intention.
Who Gets Possession of the Home During the Redemption Period
The original homeowners get to live in the home during the redemption period. If they don’t redeem, they’ll have to move out when the redemption period expires, and that's when you can move in.
The homeowners also have the option of selling the home during the redemption period. If they do this, they must sell it for enough to reimburse you for the amount you paid at the foreclosure sale plus interest.
How to Find Minnesota’s Redemption Laws
To look up the statutes that discuss the homeowners’ right to redeem the home in Minnesota, go to Chapter 580, Chapter 581, and Chapter 582 of the Minnesota Statutes.