I recently moved to North Dakota to work in the oil and gas industry, which pays really well. I’m thinking about buying a house at a foreclosure sale, but am a little reluctant. Based on what I’ve been reading, it sounds like the homeowners might be able to reclaim the house after I buy it at the foreclosure sale. Is this really true?
In North Dakota, the foreclosed homeowners can get the home back after the foreclosure sale by repurchasing or “redeeming” it, but only for a limited period of time. (This is called a redemption period.) They would do this by reimbursing you for the purchase price you paid at the foreclosure sale, plus interest. However, it's rare that a foreclosed homeowner has the financial wherewithal to do this. The foreclosed homeowner can remain in the home after the sale though -- usually for 60 days.
Not only do the foreclosed homeowners get the right to redeem the home once you’ve purchased it, but there are other parties (such as the IRS) that might choose to redeem the house too. Again, this rarely happens.
After the foreclosure sale, the homeowners generally get 60 days to redeem the home. However, if the property is agricultural, the homeowners can redeem within:
If the homeowners don’t redeem the home within the allocated time frame, they forever lose the chance to get the house back this way.
In order to redeem the house, the foreclosed homeowners must either pay you or the sheriff who conducted the sale the full amount of your winning bid at the foreclosure sale, plus interest (N.D. Cent. Code § 32-19-18).
Foreclosed homeowners rarely redeem, which makes sense. Most homeowners who (perhaps no more than 60 days ago) couldn’t catch up on their missed mortgage payments aren’t able to find a way to come up with enough money to cover the full purchase price plus interest.
It’s also possible, but unlikely, for some other party to redeem the property, such as other creditors who had liens on the home or the IRS.
The IRS can only redeem if there was a federal tax lien on the home. Under federal law, the IRS gets a 120-day redemption period (or the allowable period under state law, whichever is longer). You’ll get a notice beforehand if the IRS is considering redeeming the home.
Under North Dakota law, the former owners may live in the home during the redemption period (N.D. Cent. Code § 32-19-06).
There are several other issues to consider if you’re thinking about purchasing a house at a foreclosure sale. For example, two big downsides to purchasing a home this way are:
To find the statutes that discuss redemption rights in North Dakota, go to Title 28, Chapter 28-24; Title 32, Chapter 32-19; and Title 35, Chapter 35-22 of the North Dakota Century Code.