If I Buy a Home in Foreclosure, Can Its Owners Later Get It Back ("Redeem" It)?

If you buy a foreclosed home, the former owners might be able to redeem (repurchase) the property. But redemption rarely happens.

By , Attorney

In some states (approximately half), former homeowners get the right to reclaim ("redeem") their home after a foreclosure sale. But if the former homeowner doesn't redeem by the deadline, the purchaser gets title to the property.

To redeem, the foreclosed homeowners would have to pay the foreclosure sale price or, sometimes, the total amount owed to the bank that foreclosed, plus other allowable charges. However, most people who've gone through a foreclosure can't find enough money to redeem the home afterward.

So, even those people allowed to redeem their home following a foreclosure sale usually don't do it.

How Foreclosure Generally Works

People who take out a home loan typically sign either a mortgage or deed of trust. This document gives the lender the right to foreclose if the borrowers fail to make the payments or breach the agreement in some other way.

The foreclosure process is governed, in large part, by state law and will be either judicial or nonjudicial. The foreclosure type that the bank uses depends on the options afforded by state law and the circumstances.

All states allow the bank to foreclose judicially, while some require this process exclusively.

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.

Different Redemption Periods In Different Circumstances

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 foreclosing 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 a third party buys the home at the foreclosure sale rather than the foreclosing bank.

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 Foreclosed Home 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 a Home at a Foreclosure Sale

Again, even when the foreclosed owners get the right to redeem the property, most don't have the financial ability to do so. So, you probably don't have to worry too much about losing the house to redemption if you buy a property at a foreclosure auction.

Still, a redemption could happen. Or the foreclosed homeowners might be able to sell the redemption rights, and that party might redeem.

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.

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.

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

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