Right of Redemption After Foreclosure

If you stop making your mortgage payments, the lender (or subsequent loan owner) may use a process called "foreclosure" to sell your home and use the proceeds to repay the amount you borrowed, plus fees and costs. But even after you lose your property, you might be able to get the place back. Some states permit foreclosed homeowners to repurchase their property after a foreclosure during what's called a "redemption period."

The right to repurchase the home is called the "statutory right of redemption" because the amount of time allowed to redeem and the right itself arises solely from state statutes. Statutory rights of redemption grant borrowers a specific amount of time after a foreclosure during which they may reclaim the property by:

• paying the foreclosure sale price or
• in some cases, the full amount owed to the lender, plus certain other allowable charges.

Statutory redemption laws give borrowers more time to obtain funds so they can keep their homes. Also, state law sometimes gives the foreclosed borrowers the right to live in the home during the redemption period.

The right of redemption attempts to ensure that bidders at the foreclosure sale will bid a fair price. A higher winning bid at the foreclosure sale reduces the likelihood of the former owners redeeming the property. In reality, though, redemption statutes often chill bidding at the foreclosure sale because the purchaser must wait for the statutory redemption time to expire before officially owning the property, thereby reducing the price someone is willing to pay for the property.

Statutory Redemption Laws Vary From State to State

The length of the statutory redemption period varies from state to state, and not all states provide one. When available, the redemption period generally ranges from 30 days to a year.

In most states that provide a post-sale redemption period, specific factors often change the redemption period's length. For example:

• The redemption period might vary depending on whether the foreclosure is judicial or nonjudicial.
• The redemption period might be reduced under specific conditions, like if the homeowner abandons the property.
• The loan documents might waive the borrower's right to redemption.
• If the lender pursues a deficiency judgment, redemption rights might be triggered.
• More extensive redemption rights might be available if the foreclosing lender, rather than a third party, buys the property at the foreclosure sale.
• Loans used to purchase the property might receive greater protection than other types of mortgage loans.

How Much Does It Cost to Redeem My Home After a Foreclosure?

To redeem, a foreclosed homeowner usually has to pay either:

• the amount that the buyer paid for the home at the foreclosure sale, plus interest and certain expenses, like homeowners' association (HOA) fees and property taxes, or
• the total amount owed on the mortgage loan, plus interest and expenses.

How to Redeem Your Home After a Foreclosure Sale

Generally, to redeem a property after a foreclosure sale, the foreclosed homeowner must give a written notice of redemption to:

• the party who bought the home at the foreclosure sale and
• the court or other party that held the foreclosure sale.

Then, the former homeowner must pay the redemption amount to the buyer, court, or another party. State law normally says what information has to go in the redemption notice and who gets the redemption money. Talk to a local lawyer if you need more information about redemption procedures after a foreclosure in your state.

Consider Options for Saving Your Home Prior to the Sale

Most people who go through a foreclosure have trouble finding enough money to redeem their home afterward. So, instead of waiting until after the sale to try to keep your home, consider applying for help well in advance of the foreclosure sale. Most lenders offer loss mitigation options, like modifications, to borrowers struggling to make their mortgage payments.

But you must apply for help before the foreclosure sale happens. It's a good idea to apply for a foreclosure avoidance option as early in the process as possible. Under federal mortgage servicing laws, if you submit a complete application more than 37 days before a sale, the servicer generally has to put the foreclosure on hold while evaluating your application.

Consider Talking to an Attorney

To learn whether state law provides a post-sale redemption period where you live and in your situation, consider talking to a local foreclosure attorney. It's also a good idea to speak to a lawyer if you plan on redeeming your home to make sure you follow all required procedures.

If you need information about different ways to avoid a foreclosure, consider talking to a HUD-approved housing counselor.