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

If I buy a home at a foreclosure sale in Michigan, the foreclosed-upon owners might be able to get their home back afterward. They would do so by paying you the purchase price you paid at the foreclosure sale, plus various other charges, within a limited amount of time called a "redemption period."

In a nutshell, Michigan homeowners get a one-month, six-month, or one-year redemption period, explained in more detail below. Most homeowners get six months. The main effect on you is that you'll have to wait for the applicable length of time before moving in.

Also, not only do you have to be concerned about the foreclosed homeowners redeeming the house after you've bought it, but the IRS might be able to redeem the property if there was a federal tax lien on it.

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 for Foreclosure in Michigan?

The majority of residential foreclosures in Michigan are nonjudicial. However, unlike many other nonjudicial foreclosure states, Michigan provides a redemption period for foreclosed homeowners after the sale.

Under Michigan law, the homeowners can redeem the home after the foreclosure sale within:

• six months if more than two-thirds of the original indebtedness is still owed, or
• one year if the amount owed is less. (Mich. Comp. Laws § 600.3240(8),(12)).

If the homeowners abandoned the property, the redemption period is 30 days (or until the required fifteen-day notice that the lender considers the premises abandoned expires, whichever is later). (Mich. Comp. Laws § 600.3240(10)).

How to Find Out the Length of the Redemption Period

To find out the length of the redemption period before you purchase a Michigan home at a foreclosure sale, you can check the notice of sale that was published in the local newspaper as part of the foreclosure process. (Mich. Comp. Laws § 600.3212). These notices are sometimes available online.

How Much the Foreclosed Homeowners Must Pay to Redeem Their Michigan Home

To redeem the property, the foreclosed homeowners would need to pay the full price you paid at the sale, plus all other lawful charges such as:

• interest, and
• amounts you paid after the sale for certain expenses, like property taxes, homeowners' association assessments, and insurance premiums. (Mich. Comp. Laws § 600.3240(1), (4)). (You'd have to file proof with the register of deeds that you made such payments before you can get reimbursed for them.)

Homeowners don't redeem a foreclosed home very often because they'd have to find another source of financing and pay a lot of money to get the house back. Because the homeowners' credit took a big a hit during the foreclosure process, they're unlikely to qualify for a new mortgage.

It's also possible, but not especially common, for the IRS to redeem the home if there was a federal tax lien on the property. The IRS gets a 120-day redemption period (or the allowable period under state law, whichever is longer) to redeem after the foreclosure. It would send you a notice in advance of the redemption if it decided to redeem the home.

Who Gets Possession of the Home During the Foreclosure Redemption Period in Michigan

The original homeowners get to live in the home during the redemption period. If you buy the home at the foreclosure sale, you'll receive a Sheriff's Deed, but you won't officially own the property until the redemption period expires.

You Can Inspect the Home During the Redemption Period

Under Michigan law, the purchaser who bought the house at the foreclosure sale may inspect the home (both the interior and exterior) during the redemption period. (Mich. Comp. Laws § 600.3238).

In addition, you may immediately begin eviction proceedings to get possession of the home and terminate the homeowners' redemption period if the foreclosed homeowners:

• unreasonably refuse to allow you to inspect the home, or
• cause damage to the home or if damage to the home is imminent. (Mich. Comp. Laws § 600.3238).

Michigan law requires you to give an initial notice containing certain information and a notice 72 hours before you inspect the home's interior. It also restricts the number of reviews (interior) that you can do. The law also requires that, if you give notice, the foreclosed homeowners must let you know when they are moving out if they plan on vacating the home before the redemption period expires or they might face heightened liability for any damage to the premises. (Mich. Comp. Laws § 600.3237).

How to Locate Michigan's Foreclosure Redemption Laws

To find the statutes that discuss the homeowners' right to redeem the home in Michigan, go to Chapter 600, Act 236 of 1961 (236-1961-32) of the Michigan Compiled Laws. 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.