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REAL ESTATE redemption period

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Bilgefisher

Bronze Contributor
Read Millionaire Fastlane
Aug 29, 2007
1,812
291
73
Aurora, Co
My state has a 75 day redemption period after the foreclosure sale. I talked to the county Trustee and they said they have seen many foreclosures redeemed. What I am confused about is that 75 day period. Can I even touch the house that I purchased? Who pays the taxes on it? Has anyone dealt with this type of situation?
 
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Jason_MI

New Contributor
Jul 25, 2007
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I'll 'try' to explain it as best as I know. The redemption period goes into effect, in my state, the moment that the home is 'lost' at auction or foreclosure. It gives the homeowner the opportunity to come up with the money to get their home back. In Michigan, it's 6 months to a year, depending on how the note was written. During that time, and once you have purchased it at auction, the owner can theoretically stay in the home, and should they (through drug sales, winning the lottery, or, by some unforseen chance, gotten another loan), pay off what they owe you, they can do so, and keep the house.

Up to that point, they would have to pay you the purchase price, plus costs (e.g., legal that you incur), PLUS interest, which I think is 17%.

If they abandon the house or move (or the house was abandoned by them before foreclosure), the redemption period is 30 days, and at the end of 30 days, you can go to court, prove it is, and the Sheriff's Deed is turned into (I believe) a Warranty deed and it's yours.

That's for my state. Different states have different rules; I think Texas, for instance, has a redemption period of like 4 minutes or so.

If you want to get into Sheriff's Sales, I'd invest $250 and get an hour consult with a foreclosure attorney who will explain how the system works. That's the best way to get a handle on where the money, and risks are in this type of investing.
 

bflbob

Bronze Contributor
Read Millionaire Fastlane
Speedway Pass
Jul 25, 2007
1,896
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Endicott, New York, United States
My state has a 75 day redemption period after the foreclosure sale. I talked to the county Trustee and they said they have seen many foreclosures redeemed. What I am confused about is that 75 day period. Can I even touch the house that I purchased? Who pays the taxes on it? Has anyone dealt with this type of situation?

I've read a bit on this somewhere.

The reason some are redeemed is this.

You buy a house for $120k at auction (1st is foreclosing).
The house has a $175k FMV.
The lender gets paid off, and 2nds and 3rds are wiped.

Some less-than-scrupulous investor contacts the "seller".
He offers them $130k for the house.
They take the $130k, pay back the $120k plus $5k in fees, and walk with $5k.
The investor gets the house you bought for $120k, but pays $130k with no junior liens and time to look at the deal.
 

tbsells

Contributor
Jul 27, 2007
286
52
31
Ohio
I've read a bit on this somewhere.

The reason some are redeemed is this.

You buy a house for $120k at auction (1st is foreclosing).
The house has a $175k FMV.
The lender gets paid off, and 2nds and 3rds are wiped.

Some less-than-scrupulous investor contacts the "seller".
He offers them $130k for the house.
They take the $130k, pay back the $120k plus $5k in fees, and walk with $5k.
The investor gets the house you bought for $120k, but pays $130k with no junior liens and time to look at the deal.

Makes sense.

I wouldn't spend a dollar or an hour on a house until the redemption period is over. If you do, you are just making the above scenario more likely.
 

reipro

Contributor
Sep 27, 2007
154
44
36
52
Lincoln, NE
You have to be really careful! It just depends on what state you are in what that rules are that apply. Some states are great for redemption other are not. Like Kansas you can do what was mentioned earlier and the 2nd ect are wiped. That is not true in states like Colorado. If you let me know what state you are in I can probably tell you what the rules are. There are actually on 4 true redemption states Kansas, Colorado, Minnesota and Michigan.
 

reipro

Contributor
Sep 27, 2007
154
44
36
52
Lincoln, NE
Bilgefisher,

In Colorado you are correct about the redemption period it runs in order of priority. The HO has the first right to redeem the property, but if the HO does they also bring back all of the loans and liens on the property with it. Once the HO's redemption period is up then the next lien holder has 10 days to redeem out anyone in front of them in priority order and so on. There is not as much redemption as there used to be as the market is softer in Colorado right now. Where you can make the most bang for your buck in to buy the first at a discount. If you get redeemed you win, because you make the spread of what you paid for the note vs what is owed. If you do not get redeemed you win as you get the house.

Hope this helps!

David
If you think you can or you think you can't your right! - Henry Ford
 

max momo

Contributor
Mar 15, 2008
198
33
33
California
In California there is a redemption period on homes sold through a ‘Sheriff’s’ sale -where the county closed out all other positions - because no taxes were paid on the property for five years. The Sheriff ‘posts’ the house which begins foreclosure by the county. This post, or notice, states the date the property will sell at auction. The house can be ‘Redeemed’ if the property owner pays all back taxes before the auction date. This actually happened to a house we were prepared to bid on, the owners had not paid taxes (nor had anybody lived in or maintained the house) for three years. The NIGHT BEFORE auction, the owners paid the taxes.

The redemption refers to the right of the foreclosed to challenge the foreclosure process conducted by the county. In other words, if the foreclosed party challenges the foreclosure process, and wins, the house redemption means the property reverts to the original party. The buying party loses the house, including all upgrades, with no redress from either the originally foreclosed party or the county. The foreclosed party has one year to challenge the county, this is the ‘Redemption Period’. In our county, redemption occurred on 1% of county foreclosed homes, although the rate had been going down historically since the county does NOT want to lose these cases, and now dots their i’s and crosses their t’s a little more carefully.

Per my understanding this process is the same in all California Counties.
 

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