Foreclosure Right of Redemption Laws cause some retail buyers to hesitate when buying foreclosed properties. I don’t think you should be scared at all to buy a property that still has time left ticking on its right of redemption period ( most investors sure aren’t worried!)
I live in Alabama and our redemption period is one year from the date that the property was foreclosed. [I wrote a previous post about the history of our redemption laws including redemption periods resources for other states – you can read it here] This means that the person who was foreclosed on has a legal right to redeem (buy back) their property back for the next 12 months.
I think that this is a great opportunity given to the past owner of the home.
But not so fast!
The person got foreclosed on for a reason – it’s because they couldn’t pay their mortgage. Even if they come across the money to get their house back, they would have to pay all of the following to get back possession of their old house:
1) The mortgage amount owed, plus interest.
*it’s important to note that this is not necessarily the price paid for the house but is the amount that was owed on the home. In today’s market buyers will typically end up paying less for a house than what the actual foreclosure amount was.
2) They would be responsible for all legal fees associated with their foreclosure.
3) If improvements were made to their property they would be responsible for reimbursing the new owner for the necessary improvements made that were made, so save receipts (of course, you should do this anyway).
This is no small amount of money, especially for a person that was unable to make the payments in the first place.
This is why we see less than 5% of properties ever get redeemed in my state – and the ones that do are people that tend to have a lot of equity in their home and they are able to find some type of private financer to work with or somehow come up with the money at the last moment. And of these few redemptions that occur, they happen very early in the redemption period.
But other than that, don’t expect it to happen. My company has bought 10-15 foreclosures in the last few years and I’ve never had anyone contact me during the redemption period wanting to buy their house back.
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If you or someone you know is facing foreclosure on the Gulf Coast, contact us at Mobile House Buyers, as I may be able to help you with a solution including a short sale negotiation, taking over your mortgage payments, or possibly buying the house outright. And if I can’t help, I’ll do what I can to point you in the right direction.
If you’ve got questions or information regarding rights of redemption, I invite you to leave your questions and comments below.
PS – Happy Fathers Day to all of you Dads out there!