My wife and I are moving to Santa Fe, New Mexico, and want to buy a home in a particular neighborhood. We’re having trouble finding one for sale there, but I just found out that there's a house being foreclosed exactly where we're hoping to live. We’re very interested, but also concerned about purchasing a home at a foreclosure sale. I read online that the homeowners might be able to get the house back even after the foreclosure. Could this really happen?
Yes, it is possible, although rare, for New Mexico homeowners to get the home back after the foreclosure. To do this they would have to pay you the purchase price you paid at the foreclosure sale, plus various other charges. This is called redeeming the property.
However, foreclosed homeowners in New Mexico get the right to redeem the property only for a limited period of time (a matter of months).
We’ll describe below how New Mexico’s redemption laws might affect your ability to settle into your new home without worrying that that you might eventually lose it.
The Homeowners’ Right to Redeem After a Foreclosure in New Mexico
New Mexico foreclosures may be carried out in either of two ways. Most residential foreclosures in the state are judicial foreclosures, in which the lender files a lawsuit in court. Nonjudicial foreclosures, where the lender does not have to go through state court to foreclose, are also possible.
Does the distinction between a nonjudicial and a judicial foreclosure matter to you as a prospective buyer at a foreclosure sale? Not really, except that it affects the redemption period.
With both judicial and nonjudicial foreclosures, the redemption period is nine months, unless the terms of the mortgage contract reduce this to a shorter period -- but no less than one month. The only difference is that in a judicial foreclosure, the judge has the ability to alter the redemption period (if the homeowners ask for it) no matter what the mortgage contract says, but cannot provide more than nine months for the homeowners to redeem.
In the vast majority of foreclosures, the redemption period will be one month.
How Much the Foreclosed Homeowners Must Pay to Redeem
In order to redeem the property, the foreclosed homeowners would have to pay you:
- the amount you paid at the foreclosure sale, plus interest from the sale date at the rate of 10% a year
- all taxes, interest, and penalties
- all payments you made after the sale to satisfy any prior lien or mortgage not foreclosed, and
- interest on the taxes, interest, penalties, and payments made on liens or mortgages at a rate of 10% a year from the date of payment (N.M. Stat. Ann. § 39-5-18(A)(1), § 48-10-16(B)(1)).
As a practical matter, redemption doesn’t happen very often, and you can see why. A homeowner who, maybe no more than a month ago, was unable to keep up on the home’s mortgage payments would have to do a complete turnaround and come up with not only the purchase price, but all of these additional amounts as well.
Can Anyone Else Redeem the Home?
It’s possible, but exceedingly rare, for some other party to redeem the property, such as:
- creditors who had liens on the home (N.M. Stat. Ann. § 39-5-18(A)(3), § 48-10-16(B)(3)), or
- the IRS, if it held a federal tax lien on the home. (The IRS gets 120 days, or the allowable period under state law, whichever is longer, to redeem.)
Other Things to Think About When Buying a Home at a Foreclosure Sale
Besides keeping in mind the possibility of a redemption by the former homeowners, other creditors, or the IRS, there are certain other issues you should take into consideration before buying a home at a foreclosure sale.
For one thing, you aren’t going to get any seller disclosures regarding the condition of the property before the sale. (In a traditional sale, the seller would give you detailed information about the property's various features and their condition.)
In addition, you’ll be buying the home “as is,” without negotiating over needed repairs. Since the former owners stopped making the mortgage payments, this is a good indication that they may also have stopped paying for maintenance and repairs, as well. The house could be in seriously bad shape, both inside and out. (Learn more in Nolo’s Buying Foreclosed Properties area.)
Finding New Mexico’s Redemption Laws
To find the statutes that discuss the former homeowners’ right to redeem the home after a foreclosure in New Mexico, go to Chapter 39, Article 5, and Chapter 48, Article 10 of the New Mexico Statutes.