If I buy a home at a foreclosure sale in South Dakota, can its owners later take it back?

Buyers of foreclosure homes in South Dakota will have to wait for passage of the redemption period before moving into the home.

Question

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?

Answer

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.

The Homeowners’ Right to Redeem After Foreclosure in South Dakota

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).

How to Find Out the Length of the Redemption Period

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.

How Much the Foreclosed Homeowners Must Pay to Redeem

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:

  • taxes
  • insurance, and
  • payments on a superior lien (S.D. Codified Laws § 21-49-34, 21-52-14).

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.

Other Parties That Could Potentially Redeem the Home

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.

Other Things to Consider When Buying a Home at a Foreclosure Sale

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:

  • you won’t receive any  seller disclosures  before to the sale providing you with details about the home (so you probably won’t know much about the house you’re buying until you actually take possession)
  • you’ll have to buy the house “as is,” which means you’ll have to pay for any needed repairs yourself, and
  • there’s no guarantee about the quality of title you’ll receive at a foreclosure sale, which means there could still be outstanding liens on the property even after you buy the home. For this reason, you may want to research the property’s title history before making a bid at the sale. (Learn more in Nolo’s  Buying Foreclosed Properties  area.)

How to Locate South Dakota’s Redemption Laws

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.

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