If I Buy a Home at a Foreclosure Sale in Alabama, Can Its Owners Later "Redeem" the House?

Homeowners in Alabama may "redeem" their home after a foreclosure sale by paying the price the buyer paid at the foreclosure sale, plus various other charges. However, because a distressed former homeowner has to come up with so much cash to get the house back, redemption is rare.

What Is the Right of Redemption After a Foreclosure Sale?

In about half of the states, homeowners get one final chance to save their home, even after a foreclosure sale. The right to redeem the property after a foreclosure sale is called a "statutory" right of redemption because it's set out in the state statutes (laws).

Suppose your state provides a statutory right of redemption. In that case, the foreclosed homeowners get a redemption period, which is a limited amount of time to repurchase the home from the person or entity that bought it at the foreclosure sale. Depending on state law, the original homeowners must either reimburse the purchaser for the price paid at the sale or pay off the full amount owed on the mortgage loan, plus foreclosure fees and costs.

Basically, the redemption period gives foreclosed homeowners some additional time after a foreclosure sale to find funding to buy the home back. The length of the redemption period following the sale, if available, varies widely depending on state law and the particular circumstances.

Right of Redemption After Judicial and Nonjudicial Foreclosures

In some states, foreclosures are always judicial, which means they go through the court system. In others, the foreclosure process is typically nonjudicial (out of court), although these states also permit judicial foreclosures.

Right of redemption in judicial foreclosure states. States that use a judicial process to foreclose often give homeowners the right of redemption after a foreclosure. Even if state law doesn't provide an actual redemption period after the sale, some states allow a very limited amount of time for the homeowner to redeem until certain post-sale formalities are completed. For example, the homeowner might be able to redeem up until the court confirms the foreclosure sale.

Right of redemption in nonjudicial states. Except for a few states, there is generally no redemption period after a nonjudicial foreclosure. States that allow nonjudicial foreclosures sometimes have more than one law for redemption periods—one that applies to nonjudicial foreclosures and another to judicial foreclosures. In general, these states tend to provide a redemption period following a judicial foreclosure but not after a nonjudicial one.

What Is the Redemption Period After Foreclosure in Alabama?

Most residential foreclosures in Alabama are nonjudicial. Unlike some other states, Alabama law provides a redemption period after a nonjudicial foreclosure.

The redemption period after a foreclosure sale in Alabama depends largely on when the foreclosed homeowners took out their mortgage and whether it's a homestead property. Alabama law generally gives homeowners a one-year redemption period after a foreclosure sale.

However, state law gives homeowners a 180-day redemption period after the foreclosure sale for homestead properties—if proper notice about the right to redeem was given and the mortgage was taken out on or after January 1, 2016. (Ala. Code § 6-5-248(b)). By law, the foreclosing party must mail the homeowners a notice about the right to redeem the home at least 30 days before the foreclosure sale. (Ala. Code § 6-5-248(h)).

If the notice isn't mailed to the homeowners before the foreclosure sale, they get 180 days to redeem the homestead property from the date the notice is provided. But the homeowners can't redeem more than one year after the sale.

Can Anyone Else Redeem?

It's also possible, but exceedingly rare, for some other party to redeem the property, such as other creditors who had liens on the home.

Another very rare possibility is the IRS redeeming the property after a judicial or nonjudicial foreclosure, if there was a federal tax lien on the home. The IRS gets 120 days (or the allowable period under state law, whichever is longer) to redeem. If the IRS considers redeeming the house, it would send you a notice beforehand.

The Homeowners Can Lose the Right to Redeem

After you purchase the property at the foreclosure sale, you can demand that the homeowners vacate the property. To do this, you must deliver a written demand for possession to the homeowners. If they don't move out of the home within ten days after you give them the notice, they lose the right of redemption. (Ala. Code § 6-5-251).

How the Homeowners (or Other Party) Redeems in Alabama

To redeem the property, the former homeowners (or other redeeming party) must send you a written demand requesting a statement of all amounts you've spent on the property since the foreclosure sale. You must then provide an itemized statement within ten days of the demand. If you don't provide the statement within ten days, you lose the right to compensation for any improvements you made to the home since the foreclosure sale. (Ala. Code § 6-5-252).

How Much the Foreclosed Homeowners (or Other Party) Must Pay to Redeem

To redeem the property, the foreclosed homeowners (or other redeeming party) must pay you the purchase price you paid at the foreclosure sale, plus all allowable charges such as:

• interest
• the value of any permanent improvements you made to the property since the sale (though the redeeming party may challenge your valuation of the improvements)
• taxes you paid (or that are assessed)
• all insurance premiums you paid, and
• any valid lien you paid. (Ala. Code § 6-5-253).

What Will Happen if You Don't Give Up the Property

Once the redeeming party pays the appropriate amount within the redemption period, you must convey (sign over) the property to that party. If you fail to do so or refuse to transfer the home, the redeeming party may file a lawsuit against you to enforce the right of redemption. (Ala. Code § 6-5-255).

Other Things to Think About When Buying a Foreclosed Home

In addition to the possibility of someone redeeming the foreclosed property and taking it away from you, you should consider a few other pitfalls when considering buying a home at a foreclosure sale. For example, you won't get any seller disclosures prior to the sale and you buy the property as is.

Finding Alabama's Foreclosure Redemption Laws

To find the statutes governing redemption rights after foreclosure in Alabama, go to Title 6, Chapter 5, Article 14A of the Code of Alabama. Keep in mind that statutes change, so checking them is always a good idea.

How courts and agencies interpret and apply the law can also change. And some rules can even vary within a state. These are just some of the reasons to consider consulting a lawyer if you're thinking about buying a property at a foreclosure sale.