I just took a job in a small town in Ohio and am planning on moving there soon. I want to purchase a house, but I’m not interested in any of the homes that are currently for sale. I recently learned that there’s a house being foreclosed in a neighborhood that I’m interested in. I drove by and the place looks great from the outside. I’m seriously considering putting in a bid at the foreclosure sale to buy it, but since I’ve never done this before, I’m a little concerned. I read on the Web that foreclosed homeowners may be able to get the house back after the foreclosure sale has taken place. Is this for real? Is there really some way for them to keep the home even after the foreclosure is over and done with?
The information you read has some truth in it, but shouldn't stop you in your tracks. Homeowners in Ohio who've gone through a foreclosure can get their house back after someone purchases it at a foreclosure sale by “redeeming” it. (This means paying off the full amount of the foreclosure judgment plus certain additional amounts.) However, this is typically not a problem for potential buyers like you, since the homeowners would have to come up with a significant amount of money to do so and they'd have to redeem the house before the court confirms the sale to you.
Read on to find out how Ohio foreclosures work.
Foreclosures in Ohio are always conducted by a procedure known as "judicial," which means that when the homeowners stop making their monthly mortgage payments, the lender must file a lawsuit in state court in order to foreclose the home. After the foreclosure sale takes place, the court must confirm it in order to validate the sale.
The foreclosed homeowners could redeem the home after the sale, but they would have to do it before the court confirms the sale to you. This usually occurs somewhere around 30 to 60 days after the date of the foreclosure sale. Once the sale is confirmed, the homeowners forever lose the chance to get the home back this way and you are entitled to possession of (to own and live in) the property.
In order to redeem the house, the foreclosed homeowners would have to pay the full amount of the judgment, plus costs and interest (Ohio Rev. Code. Ann. § 2329.33).
Redemption rarely occurs, and it is easy to understand why. The homeowners who, no more than a few weeks ago, could not keep up with the monthly mortgage payments (which are usually the first bills that anyone pays if they've got any cash at all), would have to come up with financing to cover not only the full amount of the judgment, but additional amounts as well -- all within about a month or two after the sale. Most foreclosed homeowners aren’t able to pull off such a turnaround in their life circumstances.
It's possible, but not especially common, for the IRS to redeem the property after a foreclosure. The IRS can do this only if it held a federal tax lien on the home. If this is the case, the IRS by law has a period of 120 days from the sale date to redeem. You’ll get a notice ahead of time if the IRS is considering redeeming the home.
While it is unlikely that the foreclosed homeowners or the IRS will redeem the home, there are few other pitfalls to consider when it comes to buying a home at a foreclosure sale. While the house might look great from the outside, the condition inside might not be so good. An owner who couldn't make the mortgage payments most likely couldn’t afford upkeep either. (You’ll have to buy the home “as is” at the foreclosure sale and you very well might not get a chance to look inside beforehand.)
Also, you won’t be receiving any seller disclosures regarding the home’s condition before the sale, as you would with a regular, non-foreclosure sale. (Learn more in Nolo’s Buying Foreclosed Properties area.)
To find the statute that discusses the foreclosed homeowners’ right to redeem the home in Ohio, go to Title 23, Chapter 2329 of the Ohio Revised Code.