My wife and I live in Connecticut, and have been having trouble finding a home to buy in the area we like. I just heard that there's a house being foreclosed in the neighborhood where we're hoping to live. We’re seriously interested, but also worried about buying a home at a foreclosure sale. I read online that the homeowners might be able to get the house back even after the sale. Is this right? Could this really happen to us after we've purchased the property and maybe even moved in?
Yes, the former homeowners could get the home back after the foreclosure sale, by paying off the total debt plus certain additional amounts. This is called “redeeming” the home. However, they would have to act quickly and redeem the home before the court confirms the sale to you, otherwise they forever lose the chance to get the home back this way.
In Connecticut, lenders foreclose through one of two judicial procedures: strict foreclosure (where the court transfers title directly to the lender without ordering a sale) or a decree of sale foreclosure (where the court orders a foreclosure sale, also called a "foreclosure by sale").
We’ll describe below what the different types of foreclosures are and how Connecticut’s redemption laws might affect your ability to settle into your new home without fearing that you’ll eventually lose it.
Many foreclosures in Connecticut are strict foreclosures, which means a foreclosure without an auction sale. A decree of sale foreclosure, by contrast, is a foreclosure in which the court orders a sale of the property.
If you buy a home at a foreclosure sale, this means the foreclosure was a decree of sale foreclosure. (If the home goes through a strict foreclosure, you’ll have to wait until the lender puts it on the market after the foreclosure is complete before you'll get a chance to purchase it.)
If you purchase a Connecticut house at a foreclosure sale, the homeowners can redeem the home up until the court approves the sale to you. This usually happens 14 to 30 days after the sale takes place. Because the home won't be yours until this time, there is no risk that you will have already moved in!
In order to redeem the property, the foreclosed homeowners would have to pay the full judgment amount, plus all other lawful charges such as interest, attorneys' fees, and costs.
You can see why redemption is rare in Connecticut. A homeowner who, only a very short time ago, was unable to keep up on the home’s mortgage payments would have to turn around and come up with not only the full judgment amount price, but additional amounts as well.
If the foreclosed homeowner did take steps to redeem, you would probably first learn about it when the court notifies you that they have redeemed the home.
It's also possible, but rare, for the IRS to redeem the property after a foreclosure if there was a federal tax lien on the home. The IRS gets 120 days to redeem by paying you the amount you paid at the sale. If the IRS considers redeeming the house, it would send you a notice beforehand.
Besides the possibility of redemption, there are other issues to take into account when considering buying a home at a foreclosure sale. For example, you won’t get any seller disclosures regarding the condition of the property before the sale, and you will 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. (Learn more in Nolo’s Buying Foreclosed Properties area.)
To find the Connecticut statutes that discuss redemption, go to Volume 12, Title 49, Chapter 846 of the Connecticut statutes.