In some states—approximately half—the former homeowners get the right to reclaim (“redeem”) their home after a foreclosure sale. To redeem, they'd have to pay the foreclosure sale price or, sometimes, the full amount owed to the bank, plus other allowable charges. Most people who’ve gone through a foreclosure, though, aren’t able to come up with enough money to redeem the home afterward. So, even those people who get the chance to repurchase their home following the sale usually don't do it.

In this article, you’ll get information about the two different kinds of foreclosures (judicial and nonjudicial), find out why the foreclosure process is important when it comes to the former homeowners’ right to redeem, and learn how some states’ redemption laws might affect your ability to settle into your new home without worrying that you’ll eventually lose it.

Foreclosures: Judicial or Nonjudicial

People who take out a home loan typically sign either a mortgage or deed of trust. This document gives the bank the right to foreclose if the borrowers fail to make the payments or breach the agreement in some other way. The foreclosure process will be governed, in large part, by state law and will be either judicial or nonjudicial.

Judicial Foreclosures

In a judicial foreclosure, the bank files a lawsuit asking a court for the right to sell the home and apply the sale proceeds to repay the borrowers' debt.

Nonjudicial Foreclosures

In a nonjudicial foreclosure, the bank follows specific out-of-court steps, which state law specifies, and then holds a foreclosure sale. While the process differs among states, the bank might have to:

• send the borrowers a notice of default letting them know they’re behind in payments
• record the notice of default in the county records
• post a notice about the foreclosure on the property, and
• publish an announcement about the foreclosure in the newspaper.

The foreclosure type that the bank picks depends on the options afforded by state law. All states allow the bank to foreclose judicially, while some require this process exclusively. (Learn more about the difference between a judicial and nonjudicial foreclosure.)

Why Is the Type of Foreclosure Important?

Often, when state law requires the bank to use a judicial foreclosure process, the homeowners get the right to redeem the home after the sale. Also, in states that allow both types of foreclosures and have redemption period laws, the former owners typically get the right to redeem if the foreclosure was judicial—but not if the process was nonjudicial. (The “redemption period” is the specific amount of time after the foreclosure sale during which the former owners may redeem their property.)

State law also regularly provides different redemption periods for different scenarios. The redemption period could be:

• one length of time if the foreclosure is nonjudicial, but a different length if the foreclosure is judicial
• longer if the bank gets a deficiency judgment in the foreclosure
• based on how much of the outstanding debt the borrowers had paid off before the foreclosure
• shortened if the homeowners abandon the property before the foreclosure is over, or
• shorter if you (a third party), rather than the bank, buy the home at the foreclosure sale.

The length of the redemption period, if there is one, varies from state to state and ranges from several days to a year.

Who Gets to Live in the Property During a Redemption Period

Under some state laws, the foreclosed homeowners get to stay in the home during the redemption period. But in other states, whoever buys the property at the foreclosure sale gets the right to live there. Then, if the homeowners redeem, they get the property back.

Things to Consider Before Buying Property at a Foreclosure Sale

Again, even when the foreclosed owners get the right to redeem the property, most don’t have the wherewithal to do so. For that reason, you probably don't have to worry too much about losing the house to redemption. Still, a redemption could happen.

Also, besides the possibility of the former homeowners redeeming the property, a few other issues to consider when buying a home at a foreclosure sale include:

• you won’t get any seller disclosures about the property’s condition before the sale, and
• you must purchase the home “as is,” without negotiating any repairs or upgrades. Because the former owners were in financial distress, the property could be in rough shape. (Learn more about buying a foreclosed home.)

Getting Help

If you plan on buying a foreclosed home, or have already purchased one, consider talking to a foreclosure lawyer to find out if the sale will be subject to a post-sale redemption period. A lawyer can also advise you about your rights and responsibilities during any redemption period.

To learn the pros and cons of buying a foreclosed property, consider talking to a real estate attorney.

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