What Are Redemption Rights

Real Estate Agent with Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Huntsville AL

What Are Redemption Rights

What are redemption rights, is a question I've had to answer more often than not these days especially because of all the foreclosure properties on the market.  Redemption rights are of particular interest to anyone considering the purchase of a foreclosed home either as primary residence or investment property. 

There are two generally established types of redemption rights and are not available in each state.  Equitable right of redemption refers to the foreclosed individuals right to redeem his property before the foreclosure sale.  In order to redeem the property the owner usually has to make up any payments in arrears plus any associated costs and generally the loan is reinstated.  In some states the entire loan balance needs to be paid off.

The second redemption right is called Statutory Right of Redemption.  This right of the foreclosed owners poses the biggest problem to a future buyer.  State's that provide for statutory right of redemption vary in the length of the redemption period.  From weeks and up to a year.  That is; each state has a specified time up to a year after a foreclosure that the foreclosed owner may redeem their property.  However, because the foreclosed owner has to come up with the payment of the loan, lost interest, legal fees and other costs incurred by the lender, plus the new owners have to be paid a percentage on their investment into the property...former owners rarely exercise their redemption rights...but it does happen.  A way to ease some of the stress of buying a foreclosed property is to purchase the redemption rights from the owner.  I've heard of owners selling their redemption rights for a few hundred dollars.  Also, some lenders may insist on a redemption bond securing the property.

The purchaser of a foreclosed property needs to be aware of this...and remember the clock starts ticking on the day of foreclosure.  If you are considering the purchase of a foreclosed property your agent can get you this information.  If you don't have an agent yet, give me a call and I'd be glad to help answer your questions.

Nick T Pappas 

If you need a knowledgeable real estate professional in Madison or Huntsville Alabama area, why don't you let me Google that for you!  I also know outstanding agents in all states and Canada should you need help relocating to a new area.


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Dawn A Fabiszak
Private Label Realty ( Denver metro area, Colorado - Aurora, CO
The Dawn of a New Real Estate Experience!

Nick ~ great explanation.  It can be confusing for some.  Folks need to check with their states and find out what their foreclosure laws are.

Jan 01, 2011 03:01 PM #1
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
RealtorĀ®, Springfield Mo Real Estate

We have redemption rights in Missouri as well.  Very difficult to accomplish though. 

Jan 01, 2011 03:35 PM #2
Toni Weidman
Sailwinds Realty - Trinity, FL
20+ Years Selling Homes in New Port Richey, FL

Very clear explanation, Nick. I'm sure it doesn't happen often but it's kind of like a sword dangling over the purchaser's head-they definitely do need to be aware of it.

Jan 01, 2011 11:59 PM #3
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

Nick this post is a fine description of a few issues that are always there for a foreclosure. It could be one of the reasons so many foreclosures sit outside the market before becoming available. Very few homeowners come back to reclaim, but it can happen. Maybe a good idea would be for an owner of a new foreclosure to take a lot of photos of the house and the condition the former owners left it, especially if they intend to fix it up. Then save the receipts and be ready for a fight to recover that money.

Jan 02, 2011 12:17 AM #4
Jackie Connelly-Fornuff
Douglas Elliman Real Estate in Babylon NY - Babylon, NY
"Moving at The Speed of YOU!"

Hi Nick, perfect explanation about redemption rights. One needs to be careful when buying a foreclosure!

Jan 02, 2011 12:38 AM #5
Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

Nick, do you know if Alabama is the only state with a 12 month right of redemption period?  Anybody?

Jan 02, 2011 02:34 AM #6
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

Dawn-individual states have their own rules regarding redemption rights, so yes the owner or buyer needs to check it's own state.

Kay-I know that Missouri is one of the states allowing one year redemption rights...as to the difficulties I can't speak.

Toni-it may not appear to be a big sword until it happens...time to move again.

Ed-the picture documentation you suggested is a good idea.  However the new owners should only make repairs or improvements that would be considered necessary.  They won't get reimbursed for installing granite counter tops when laminate is sufficient.

Jackie-buying foreclosures can be a great way to get into a home for less, but there are risks involved that the average buyer isn't aware of.

Ann-I'm aware of at least thirteen states with redemption rights up to a year; Alabama, Alaska, Arkansas, California, Idaho, Kansas, Kentucky, Missouri, North Dakota, possibly South Dakota, Tennessee, Vermont and Wisconsin.  However, certain conditions apply to each that may shorten or lengthen that time frame.

Jan 02, 2011 06:03 AM #7
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Nick T Pappas

Madison & Huntsville Alabama Real Estate Resource
Call or email me anytime with your questions.
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