Bankruptcy

Real Estate Foreclosure and Redemption Processes in the U.S.

By Amy Loftsgordon, Attorney

Talk to a Local Foreclosure Attorney

If you don’t make your mortgage payments, the lender can foreclose. (A foreclosure is the legal process that allows the lender to sell your home to repay the mortgage loan.)

All states allow homeowners who are facing a foreclosure to stop the process by “redeeming” the home prior to the sale. To redeem the home, you have to pay off the entire mortgage debt. In addition, some states (about half) give homeowners the right of redemption after the foreclosure sale, as well.

Depending on the laws in your state, you may get a right to redeem the home either before or after a foreclosure sale.

Understanding the Right of Redemption

When it comes to foreclosure, “redeeming” the home means either:

  • paying off the total mortgage debt before the foreclosure sale in order to stop the process (a pre-foreclosure right of redemption), or
  • reclaiming the home after the sale, by reimbursing the purchaser for the amount he or she paid at the sale or repaying the total mortgage debt, plus interest and expenses (depending on state law). This is a post-foreclosure right of redemption.

Pre-Foreclosure Right of Redemption

No matter what state you live in, you get the right to redeem the home before a foreclosure sale occurs. This is called an equitable right of redemption. It’s based on the idea that it’s fair to let homeowners keep their home if they pay off the mortgage debt—even if they’re already in default, and the lender has initiated foreclosure proceedings.

How Much It Will Cost to Redeem Before the Foreclosure Sale

To redeem the home before the sale, you must pay off the entire outstanding mortgage balance, plus all interest, fees, and costs that have accrued at the time of redemption. This will stop the foreclosure in its tracks.

While a homeowner can redeem at any time before the foreclosure sale is held, redemptions don’t happen too often. This is because people who have enough money to redeem usually don’t get so far behind in payments that the lender starts a foreclosure. (Under federal mortgage servicing rules, the lender can’t begin a foreclosure until the borrower is more than 120 days delinquent on payments.)

Post-Foreclosure Right of Redemption

In about half of the states, homeowners get one final chance to save their home, even after a foreclosure sale. The right to redeem the home after a foreclosure sale is called a “statutory right of redemption” because it is set out in the state statutes (laws).

If your state provides a statutory right of redemption, you get a certain amount of time (called a redemption period) during which you can repurchase the home from the person or entity that bought it at the foreclosure sale. Basically, the redemption period gives you some additional time after the foreclosure sale to find funding to buy your home back.

Many states permit the foreclosed homeowner to live in the home during the redemption period. However, in other states, the purchaser who buys the home at the foreclosure sale gets the right to possess the home. But if the homeowners redeem, they get it back.

Redeeming After a Judicial Foreclosure vs. a Nonjudicial Foreclosure

In some states, foreclosures are always judicial, which means they are processed through the state courts. Other states permit nonjudicial (out of court) foreclosures, in addition to judicial foreclosures.

Judicial foreclosures. States that use a judicial process often give homeowners the right to redeem the home following a foreclosure. For example, under New Mexico law, the redemption period after a judicial foreclosure is nine months, although the mortgage contract may reduce this time frame to one month.

Or, if there isn’t a redemption period after the sale, state law might give a limited amount of time for the homeowner to redeem up until certain post-sale procedures are finished. For example, in Ohio, the court must confirm the foreclosure sale after it takes place. The borrower has the right to redeem the home at any time after the sale, up until the sale is confirmed.

However, there are a few judicial foreclosure states, such as Wisconsin, where the redemption period takes place before the sale. The length of the redemption period depends on the circumstances. It will be one year or six months if you live in the home, but only five weeks if you have abandoned the home.

Nonjudicial foreclosures. In most cases, if the foreclosure is nonjudicial, there won’t be a redemption period after the sale. There are, however, a few states that allow the homeowner to redeem after a nonjudicial foreclosure. For example, the most common type of foreclosure process in Minnesota is nonjudicial, and borrowers usually get six months after the sale to redeem the home.

If you’re facing a nonjudicial foreclosure and think you may want to redeem after the sale, be sure to check your state’s laws to find out if you are given this right.

There may be more than one redemption law in your state. States sometimes have more than one law when it comes to the right of redemption. One law will apply to nonjudicial foreclosures and another law will apply to judicial foreclosures.

Typically, states with these types of laws will give a redemption period to homeowners after a judicial foreclosure, but not if the foreclosure is nonjudicial. For instance, in Idaho, the redemption period following a judicial foreclosure is either six months or one year after the sale, depending on the size of the property. However, if the foreclosure is nonjudicial, there is no redemption period.

Factors that Determine the Length of a Post-Foreclosure Redemption Period

The length of the redemption period following the sale, if available, varies widely depending on:

  • state law and
  • the particular circumstances.

In Tennessee, for example, the redemption period after foreclosure is two years, but only if the mortgage or deed of trust that you signed when taking out the loan doesn’t specifically waive the right of redemption.

Also, state laws often provide different redemption periods depending on the circumstances. For example:

  • The redemption period could be longer if the lender wants a deficiency judgment. (Some states permit the lender to get a personal judgment against you for the amount of the deficiency, which is the difference between the foreclosure sale price and the total debt. This is called a “deficiency judgment.”)
  • The terms of the mortgage contract might waive (give up) the borrower’s right to a redemption period.
  • The redemption period might be reduced if the homeowner abandons the home.
  • The homeowner might be entitled to more redemption rights in cases where the foreclosing party buys the home at the foreclosure sale.
  • The redemption period might be longer or shorter depending on how much of the mortgage debt has been paid off.

How Much It Will Cost to Redeem Following the Sale

Generally, to redeem after a foreclosure sale, you’ll have to pay:

  • the full amount the buyer paid for the home at the foreclosure sale, plus various other amounts, such as interest and, in some cases, certain expenses that the purchaser paid after the sale (for example, property taxes, insurance, HOA assessments, or repairs), or
  • the full amount of the mortgage debt, plus interest and other fees.

How to Redeem the Home After a Foreclosure

The specific steps you need to take to redeem following a foreclosure sale depends on state law, but usually you must:

  • let the purchaser (the person or entity) who bought the home at the foreclosure sale know that you want to redeem
  • inform the court (or other party that held the foreclosure sale) that you want to redeem (by a certain deadline), and
  • make your redemption payment to the court or to the purchaser.

Sometimes, redemption requirements under state law are complicated. Ohio, for example, has a complex redemption process. If you want to redeem your home following an Ohio foreclosure sale, it is highly recommended that you speak with an attorney.

Alternatives to Redeeming the Home

The majority of homeowners who are going through a foreclosure (or who’ve already lost their home to a foreclosure sale) don’t have enough money on hand to redeem. For this reason, it’s ordinarily a good idea to look into workout options before the sale takes place if you want to keep your property.

For example, homeowners may be able to avoid a foreclosure by paying off the overdue amounts to get current on the loan (which is called "reinstating" the mortgage) or by working out a mortgage modification that makes the monthly payments more affordable.

Questions for Your Attorney

  • Can I redeem my home after the foreclosure sale?
  • How long is the redemption period in my state?
  • Can I live in the home during the redemption period?
  • How much will it cost to redeem?
  • What options are available to me to prevent a foreclosure sale in the first place?
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