What you need to know:
When buying a property that has undergone foreclosure, one
of the things to be aware of is the right of redemption. In many states, the borrower who was
foreclosed on has a certain time in which he can come back, pay what he owed,
and redeem his house. These rights vary
from state to state, so before you buy a foreclosed property, you should ask an
attorney in your jurisdiction what the relevant law says.
In Alabama this right is created by statute and can be found
in the Alabama Code at Section 6-5-247. The
redeemer can be the borrower, other creditors of the borrower who had a junior
lien, or the spouse or heirs of the borrower.
The right of redemption here runs for one year from the date of the
foreclosure. There has been discussion
in the state legislature about reducing that redemption period, but as of this
posting nothing has passed.
What you need to do:
Find out the date of foreclosure and the date the redemption
period will end.
Find out the foreclosure amount. If the foreclosure amount is greater than
your purchase price, you can feel reasonably comfortable since your investment
will be returned. If the foreclosure
amount is less than the purchase price, you should acquire a redemption bond to
insure your investment in the case of redemption.
Find out what is included in the redemption amount. For instance, in Alabama, the redeemer must
pay the foreclosure amount, but he is responsible for other costs such as
necessary improvements made to the house.
If this is the case in your jurisdiction, you need to make sure that you
keep good documentation on improvements you make.
This post is for
informational purposes only and is not intended as legal advice. If you have a
legal question, you should contact an attorney in your jurisdiction.
