I live in South Dakota and would like to buy a house at a foreclosure sale. However, based on my understanding of South Dakota foreclosure law, the homeowners can get the house back after I buy it at the foreclosure sale by “redeeming” it. How long do the former owners get to reclaim the house after the sale? Might I lose out on other opportunities by pursuing -- and then losing out on -- this one?
Most foreclosed homeowners in South Dakota get 180 days to repurchase or “redeem” the home after a South Dakota foreclosure sale, though this can vary. (This is explained in more detail below.) In addition, there are other parties (such as other creditors who had liens on the home and the IRS) that might choose to redeem the house, too.
Generally, under South Dakota law, the former homeowners may redeem the home within one year after a foreclosure sale (S.D. Codified Laws § 21-52-11). However, most residential mortgages of properties consisting of 40 acres or less in South Dakota are subject to what’s called the “180 Day Redemption Mortgage Act.”
Under this Act, the former homeowners get 180 days to redeem after you record the certificate of sale (S.D. Codified Laws § 21-52-11, § 21-49-30). (If you buy a home at a foreclosure sale in South Dakota, you must record a certificate of sale in the office of the register of deeds within 20 days after the sale.) (S.D. Codified Laws § 21-49-30).
The foreclosed homeowners get to live in the home during the redemption period (S.D. Codified Laws § 21-49-12). However, if they abandon the home, the redemption period can be reduced to 60 days (S.D. Codified Laws § 21-49-13(8), § 21-49-38).
To find out the length of the redemption period, check the notice of foreclosure sale that was published in the local newspaper as part of the foreclosure process. You can often find these online.
In order to redeem the house, the foreclosed homeowners would have to pay you the purchase price you paid at the foreclosure sale, plus interest and certain sums you paid to protect your interest in the property such as:
Foreclosed homeowners don’t often redeem, which makes sense. Not only were they obviously in financial trouble, but since a foreclosure severely damages the homeowners’ credit score, they most likely won’t be able to qualify for a new mortgage.
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.
Under federal law, the IRS gets a 120-day redemption period (or the allowable period under state law, whichever is longer), if there was a federal tax lien on the home at the time of the foreclosure. The IRS would send you a notice beforehand if it's considering redeeming the home.
If you’re thinking about purchasing a house at a foreclosure sale, there are several other issues to think about besides a possible redemption. For example, a few big negatives to purchasing a home at a foreclosure sale are:
To find the statutes that discuss redemption rights in South Dakota, go to Title 21, Chapter 49 and Chapter 52 of the South Dakota Codified Laws.