I want to buy a house in Nashua, New Hampshire. I just found one online that’s being foreclosed in the neighborhood where I want to live. I'd like to buy the home at the foreclosure sale, but keep hearing about risks and problems that come with buying foreclosed homes. My biggest worry is that the owners might have the right to get the house back after the foreclosure. Could this really happen after I’ve bought the property?
The vast majority of foreclosures in New Hampshire are nonjudicial, which means the lender does not have to go through state court to foreclose. This is good news for you because the homeowners won’t get the right to redeem (repurchase) the home after this type of foreclosure. Generally, if you’re the winning bidder at the foreclosure sale, you’ll sign a purchase and sale agreement for the home immediately after the bidding ends. You’ll typically have to make a deposit of several thousand dollars at the sale and then pay the balance of the purchase price within 30 days.
While it’s not likely, it is possible that the IRS could redeem the home after the foreclosure sale -- but only if there was a federal tax lien on the property. (We’ll describe below how this works and whether it might affect your ability to settle in to your new home without worrying that the IRS may take it away from you.)
If you buy a home at a foreclosure sale, the IRS (in some instances) gets a period of time during which it can redeem the house by paying you the amount you paid at the foreclosure sale, plus interest (at a rate of 6%) and amounts you paid for certain items, such as necessary repairs.
The IRS only has the right redeem if there was a federal tax lien on the home. This right is automatically extinguished if it does not redeem within 120 days after the sale (called a “redemption period”).
In most cases, the IRS doesn’t redeem. (The IRS would only choose to redeem if it would be able to subsequently sell the house for more than you paid at the foreclosure sale.) In the unlikely event that the IRS did decide to redeem, you would first find out about it when you receive a notice informing you that the IRS is considering redeeming the home.
There are a few other things you should think about if you’re seriously considering purchasing a house at a foreclosure sale. First of all, you won’t get any seller disclosures about the condition of the house before the foreclosure sale occurs. (In a regular sale, you could ask the seller for written information about the home’s features and defects.)
Secondly, you’ll have to buy the house “as is,” maybe without even going inside the house to inspect it for structural issues and needed repairs. Most houses that have gone through a foreclosure need a lot of work. Homeowners who can’t keep up with mortgage payments often stop paying for routine maintenance as well.
In addition, owners who are upset at the bank about the foreclosure sometimes feel justified in damaging the home before they leave. Angry owners have been known to deliberately damage their houses by doing things like removing all of the appliances or ripping holes in walls, among other things. You are probably safe to assume that you’ll find at least one thing wrong with any house you buy at a foreclosure sale. (Learn more in Nolo’s Buying Foreclosed Properties area.)
To find the statute that discusses the right to redeem in New Hampshire, go to Title XLVIII, Chapter 479 of the New Hampshire Statutes.