I’m currently renting an apartment in Washington, DC, but am thinking about buying a condominium. There is a great condo in the building next to mine that is being foreclosed and I would like to purchase it at the foreclosure sale. I'm hesitant, though, because someone told me that the owners could get the condo back after the foreclosure sale by “redeeming” the property, which I think means reimbursing me for the amount I paid at the sale. Is that true?
No. You don’t have to worry about the homeowners getting the condo (or any other type of residential property) back after the foreclosure sale. The District of Columbia does not provide foreclosed homeowners with the right to redeem after the sale.
However, the IRS could potentially take the condo away from you by redeeming it (that is, reimbursing you for the full purchase price, plus various other amounts) after the foreclosure sale if there was a federal tax lien on the property. We’ll describe below how this might affect your ability to settle into your new condo without having to worry that you’ll eventually lose it.
It's possible, but not common, for the IRS to redeem a house or condo after a foreclosure sale if there was a federal tax lien on the property. The IRS gets a 120-day redemption period. The right to redeem automatically expires if the IRS does not take action within this time frame. (If you request it, the IRS may agree to release the right to redeem before the redemption period expires.)
In order to redeem the property, the IRS would have to pay you the amount you paid at the foreclosure sale, plus:
If the IRS considers redeeming the property it would send you a notice beforehand, letting you know. The IRS would redeem only if it believes that it could later sell the property for more than you bought it for at the foreclosure sale.
Besides the possibility of an IRS redemption, there are other issues to think about if you’re considering buying a condo or other property at a foreclosure sale. An important one is that you won’t receive any seller disclosures regarding the condition of the property before the sale.
Also, you’ll have to purchase the property “as is,” without negotiating over repairs. Since the owner was in financial distress, this means the condo could need a significant amount of maintenance. (Learn more in Nolo’s Buying Foreclosed Properties area.)
To find the statutes that discuss foreclosure sales in Washington, DC, go to Title 42, Subtitle I, Chapter 8 of the District of Columbia Code.