I live in a rented apartment in Seattle, Washington, but I’d like to purchase a home in the next few months. My plan is to find a house that is in foreclosure and then make a bid at the sale. However, I’m a little worried that the homeowners might be able to get the property back once the foreclosure is completed. Could this happen after I’ve bought a house this way and moved in?
Yes, it is possible, although very uncommon, for Washington homeowners to get the house back after a foreclosure sale. They would do this by paying you the amount you bid at the foreclosure sale, plus various other costs. This is known as redeeming the property.
In a nutshell, foreclosed homeowners in Washington get the right to redeem the home only in the case of what’s called a judicial foreclosure, subject to some limitations. (This is explained in more detail below.) If the foreclosure is nonjudicial (as most are), the former homeowners cannot get the home back after the foreclosure.
Read on to learn more about these different types of foreclosures and how Washington’s redemption laws might affect your ability to settle into your new home without having to worry that you might lose it at some point afterward.
Most residential foreclosures in Washington are nonjudicial, which means the lender does not have to go through state court to foreclose. Judicial foreclosures, where the lender files a lawsuit in court to foreclose, are also possible.
Does the difference between a nonjudicial and a judicial foreclosure really matter to you as a potential buyer at a foreclosure sale? Yes, because whether the homeowners can redeem depends primarily on the foreclosure process that the lender uses.
How to find out whether the foreclosure is nonjudicial or judicial. One way to find out whether the foreclosure is nonjudicial or judicial is to go to www.zillow.com. You must sign up for a free account; otherwise you won’t be able to review all of the foreclosure information. Enter the address of the home you’re thinking of bidding on in the search box, which will bring up a map of the neighborhood. Next, click on the home’s address, which is a link to its Web page. Then, scroll down to where you see “More foreclosure information” and click on the link to find out whether the foreclosure is nonjudicial or judicial. (If you want to call someone for information about the foreclosure, you can usually find the name and phone number of the foreclosure trustee or attorney here, as well.)
If the foreclosure is nonjudicial, the former homeowners won’t get the right to redeem the house (Wash. Rev. Code Ann. § 61.24.050(1)). This is great news for you,de since the vast majority of foreclosures in Washington are nonjudicial.
If the foreclosure is judicial, the homeowners may redeem the home within:
What is a deficiency judgment? In many foreclosures, the homeowners owe more on the mortgage than the house sells for at a foreclosure sale. The difference between the sale price and the total mortgage debt is called a deficiency. In some states, including Washington, the lender can seek a personal judgment against the homeowner to recover the deficiency under certain circumstances. (Learn more about Deficiency Judgments After Foreclosure in Washington.)
If the court determines that the homeowners abandoned the home for six months or more, they don’t get a redemption period (Wash. Rev. Code Ann. § 61.12.093).
In order to redeem, the former owners would have to reimburse you for the full amount you bid at the sale, plus all other allowable charges such as interest and the amount of any assessments or taxes you paid, plus interest on that amount (Wash. Rev. Code Ann. § 6.23.020(2)).
Redemption is not very common, and it’s easy to see why not. A Washington homeowner who, perhaps only eight months ago, was unable to keep up on the home’s mortgage payments would have to turn around and come up with not only enough money to pay you back for the amount you paid at the sale, but also enough to cover interest and many of your expenses related to the home.
It’s also possible, but rare, for some other party (such as various creditors who had liens on the home) to redeem the home (Wash. Rev. Code Ann. § 6.23.010).
In some cases, the IRS may redeem a house after a judicial or nonjudicial foreclosure -- though this doesn’t happen very often, either. The IRS can redeem only if there was a federal tax lien on the home at the time of the foreclosure.
The IRS gets 120 days (or the allowable period based on state law, whichever is longer) to do this. You would get a notice in advance if the IRS considers redeeming the home.
To find the statutes that discuss redemption rights in Washington, go to Title 6, Chapters 61.12, 6.23, and 61.24 of the Revised Code of Washington.