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

It is possible—but rare—for California homeowners to get their home back after a foreclosure. They would do so by paying the purchase price paid at the foreclosure sale, plus various other charges. This process is called "redeeming" the property.

But foreclosed homeowners in California get the right to redeem the property only if the foreclosure was judicial, as opposed to nonjudicial, and meets certain other criteria.

We'll describe below what these different types of foreclosures are and how California's redemption laws might affect a purchaser's ability to get possession of a property after buying it at a foreclosure sale.

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.

How Does Foreclosure in California Work?

Most residential foreclosures in California are nonjudicial, but judicial foreclosures are also possible.

California Homeowners Can't Redeem After a Nonjudicial Foreclosure

In California, foreclosed homeowners have no right to redeem their property after a nonjudicial foreclosure.

California Homeowners' Right to Redeem After a Judicial Foreclosure

If the foreclosure is judicial, the homeowners may redeem the property within:

• three months after the foreclosure sale if the sale proceeds were sufficient to cover the total debt that the homeowners owed, or
• one year after the foreclosure sale, if there was a deficiency. (Cal. Code Civ. Proc. § 729.030). (A "deficiency" occurs when the foreclosure sale price is less than the homeowners' total debt. To find out whether the foreclosure sale resulted in a deficiency, check with the court.)

However, if a deficiency exists and the lender waives the right to get a "deficiency judgment" (a personal judgment against the homeowners for the deficiency amount) or California law prohibits a deficiency judgment under the circumstances, the former homeowners don't get any redemption period. (Cal. Code Civ. Proc. § 726(e)).

How Much the Foreclosed Homeowners Must Pay to Redeem a Foreclosed Home in California

To redeem the property, the foreclosed homeowners would have to pay the amount paid at the foreclosure sale, plus all allowable charges such as:

• the amount of any assessments or taxes
• reasonable amounts the purchaser paid for fire insurance, maintenance, upkeep, and repairs
• the amount of any prior liens that the purchaser paid, and
• interest. (Cal. Code Civ. Proc. § 729.060).

You can see why redemption is so rare in California. A homeowner who, perhaps no more than a year ago, was unable to keep up on the home's mortgage payments would have to turn around and come up with not only the purchase price, but additional amounts to cover interest and expenses.

If the foreclosed homeowners did take steps to redeem, you would probably first learn about it when they (or their attorney) request a redemption amount. Once the homeowners pay the redemption amount to the levying officer who conducted the foreclosure sale, the officer will promptly deliver the payment to you. (Cal. Code Civ. Proc. § 729.080).

Who Gets to Live in the Property During the Redemption Period in California

If you purchase a home at a foreclosure sale, the foreclosed homeowners get possession of the property—that is, they get to keep living there—from the time of sale until redemption or until the redemption period expires.

You're entitled to receive compensation from the foreclosed homeowners for their use and occupation of the property during this period, but any amounts collected must be applied as a credit on the redemption amount. (Cal. Code Civ. Proc. § 729.060).

You can also repair and maintain the premises during the redemption period and may get an order from the court preventing the foreclosed homeowners from damaging the property, if necessary. (Cal. Code Civ. Proc. § 729.090).

Can Others Redeem After a California Foreclosure?

It's also possible, but rare, for the IRS to redeem the property after a judicial or nonjudicial foreclosure, if a federal tax lien was on the home before the foreclosure. 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.

Other Things to Think About When Buying a Foreclosed Home in California

Besides the possibility of redemption, some other issues to take into account when considering buying a home at a foreclosure sale include the fact that you won't get any seller disclosures regarding the condition of the property before the sale, and you'll have to purchase the property "as is," without negotiating over repairs. And the fact that the owner was in financial distress means the property could be in bad condition.

Finding California's Redemption Laws

To find the California statutes that discuss the right to redeem after a judicial foreclosure, go to the California Code of Civil Procedure and look at §§ 729.010 to 729.090. 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 an attorney if you have questions about foreclosures.