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 I'm 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. This period is called a "redemption period." They would do this by reimbursing you for the purchase price you paid at the foreclosure sale, plus interest. But 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, like 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. But not if the property is abandoned or agricultural. If the property is agricultural, the homeowners can redeem within 365 days after the filing of the summons and complaint in the office of the clerk of district court or the time of the first publication of the notice by advertisement. But the final date for redemption of agricultural land may not be earlier than 60 days after the sheriff's sale. (N.D. Cent. Code § 32-19-18.) (Learn about North Dakota foreclosure procedures.)
If the homeowners don’t redeem the home within the allocated time frame, they lose the chance to get it back this way.
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 redeem the property if the home is subject to a federal tax lien. Under federal law, the IRS gets a 120-day redemption period or the allowable period under state law, whichever is longer.
Under North Dakota law, the former owners may live in the home during the redemption period. (N.D. Cent. Code § 32-19-06.)
You should also consider some other issues if you’re thinking about purchasing a house at a foreclosure sale. For example, two significant downsides to buying 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. 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.