I live in Nebraska and want to buy a house at a foreclosure sale soon. One thing worries me, though. I've heard that foreclosed homeowners can sometimes get a property back even after the foreclosure is completed. Is this right? Could it happen that we'd buy the house and then lose it again?
No, Nebraska law does not give the foreclosed homeowners the ability to get the home back after the foreclosure is over. (In states other than Nebraska, this can be an issue.) However, if the foreclosure happens to be conducted via a procedure known as "judicial," there is a period of time between the foreclosure sale and when a court confirms the sale that Nebraska homeowners could repurchase or “redeem” the home and keep it.
This may not be a big problem for you, though. For one thing, judicial foreclosures are not that common in Nebraska. (Most foreclosures are nonjudicial.) In addition, the time period between the sale and confirmation tends to be pretty short.
Foreclosures in Nebraska can be judicial (in which the lender files a lawsuit in court) or nonjudicial (which means the foreclosure takes means outside of the court system).
How does the distinction between a judicial and a nonjudicial foreclosure matter to you as a prospective buyer at a Nebraska foreclosure sale? If the foreclosure is nonjudicial, the former homeowners won’t have a chance to redeem the home following the sale. After the sale, you’ll get a trustee’s deed without a right of redemption (Neb. Rev. Stat. § 76-1010(2)). This is good news for you, since foreclosures in Nebraska are typically nonjudicial.
Judicial foreclosures are possible in Nebraska. After the foreclosure sale takes place, a court must confirm the sale to finalize it. The former homeowners have up until the date the court confirms the sale to redeem the house.
There is no right of redemption for the homeowners once the court confirms the foreclosure sale (Neb. Rev. Stat. § 25-1530). This means they won’t get another opportunity to get the house back. Confirmation typically takes place sometime around 30 days after the sale.
In order to redeem before the sale to you is confirmed, the homeowners would have to pay the purchase price plus 12% interest on that amount from the sale date to the date of redemption (Neb. Rev. Stat. § 25-1530(1)).
You can see why redemption is rare. The Nebraska homeowners who, not that long ago, were unable to keep up on their monthly mortgage payments would have to find a way to come up with not only the full amount of the purchase price, but also interest, in a very short amount of time.
If there was a federal tax lien on the property due to unpaid taxes, the IRS gets a 120-day redemption period after a foreclosure. However, the IRS doesn’t exercise its right to redeem very often. In the unlikely event that the IRS considers redeeming the home after you purchase it at the foreclosure sale, it would send you a notice beforehand.
There are various other issues to consider if you're thinking of buying a house at a foreclosure sale. In many instances, you aren’t able to enter the property before you bid at a foreclosure sale to evaluate its condition. The property might look fine from the outside, but be in rough shape inside.
Homeowners who can’t keep up with mortgage payments sometimes stop maintaining the home, as well. Repairs may have been left unattended for quite some time. In addition, angry owners facing foreclosure sometimes intentionally damage their homes by doing things like tearing out the plumbing, putting cement in drains, ripping up carpeting, and punching holes in walls, among other things.
Since you’ll have to purchase the house “as is” (without negotiating over repairs) there could potentially be significant repair costs that you’ll have to deal with after you’ve bought the property. (Learn more in Nolo’s Buying Foreclosed Properties area.)
To find the statutes that discuss the homeowners’ right to redeem the home after a foreclosure in Nebraska, go to Chapter 76 and Chapter 25 of the Nebraska Revised Statutes.