My husband and I are moving to Las Vegas, Nevada, and we’re not having much luck locating a home to buy in the area where we’re hoping to live. We just learned that there's a house in foreclosure in the neighborhood that we like. We would really like to buy the house at the foreclosure sale, but we’re also worried about purchasing a home this way because I heard that the homeowners might be able to get the house back even after the foreclosure. Is this true? Could the former owners really get the house back after we've purchased it and moved in?
Yes, it is possible, although not at all likely, for Nevada homeowners to get the house back from you after the foreclosure sale. They would do so by paying you the purchase price you paid at the foreclosure sale, plus various additional amounts. This is called redeeming the property.
Foreclosed homeowners in Nevada get the right to redeem the property only in the case of what’s called a judicial foreclosure. If the foreclosure is nonjudicial, the homeowners cannot get the home back after the foreclosure.
We’ll describe below what these different types of foreclosures are and how Nevada’s redemption laws might affect your ability to settle into your new home without worrying that you’ll eventually lose it to the former owners.
Most residential foreclosures in Nevada are nonjudicial, which means the lender does not have to go through state court to foreclose. Judicial foreclosures, in which the lender files a lawsuit in court, are also possible.
How does the distinction between a nonjudicial and a judicial foreclosure matter to you as a prospective buyer at a Nevada foreclosure sale? As you’ll see below, if the foreclosure is nonjudicial, the former homeowner won’t have the right to redeem the property, which is good news for you.
How to find out if the foreclosure is nonjudicial or judicial. One way to find out whether the type of foreclosure process that the lender is using is nonjudicial or judicial is to go to www.zillow.com. You’ll first need to sign up for a free account and log in (otherwise you won’t be able to view all of the foreclosure information). Locate the home you’re interested in by entering the address in the search box. This pulls up a map of the neighborhood. Then click on the house’s address, which is a link to its Web page. Scroll approximately one-third of the way down and click on “More foreclosure information.” This will tell you whether the foreclosure is nonjudical or judicial. (If you want to call someone for information about the foreclosure, you can probably find the name and phone number of the foreclosure trustee or attorney on this screen as well.)
Under Nevada law, the foreclosed homeowners don’t get a right to redeem the home after a nonjudicial foreclosure (Nev. Rev. Stat. § 107.080(5)). Since most residential foreclosures in Nevada are nonjudicial, what this means for you is that the former homeowners probably won’t have any legal opportunity to get the home back after the sale.
On the other hand, if the foreclosure is judicial, the homeowners may redeem the property within one year after the sale (Nev. Rev. Stat. § 21.210).
In the unlikely event that the former homeowners of the house you purchased get the right the redeem, they would have to pay you the amount you paid at the foreclosure sale plus 1% per month, together with all additional lawful charges such as:
You can see why redemption doesn’t happen too often -- not even when the homeowner gets a right to redeem after the foreclosure. A Nevada 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 financing to cover not only the purchase price, but additional amounts as well.
It's also possible, but not common, for the IRS to redeem the property after a judicial or nonjudicial foreclosure under federal law, if there was a federal tax lien on the home. The IRS gets a 120-day redemption period (or the allowable period under state law, whichever is longer) to redeem.
If the IRS has plans to redeem the home, it will send you a notice beforehand to let you know.
Besides the possibility of the former homeowners or the IRS redeeming the property, there are other issues to think about when considering buying a home at a foreclosure sale. For instance, you won’t (unlike with a traditional sale) receive any seller disclosures regarding the condition of the property before the sale, and you will have to purchase the property “as is,” without being able to negotiate any repairs.
Foreclosed homes are often in bad condition, too. Owners who are in too much financial distress to pay the mortgage often put off completing repairs due to their financial difficulties. (Learn more in Nolo’s Buying Foreclosed Propertiesarea.)
To find the statutes that discuss the foreclosed homeowners’ right to redeem the home after a judicial or nonjudicial foreclosure in Nevada, go to Chapter 21 and Chapter 107 of the Nevada Revised Statutes.