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Does anyone know what is involved in getting the right of redemption from the previous owner when buying a foreclosure home? Do we need an attorney?
Just thinking of buying a home that is on sale by the bank and for the piece of mind, I think it's better to get the redemption rights with you before making an offer.
The house is located in birmingham area (AL) and the listing says right of redemption applies. Looks like previous owner was not able to pay mortgage payments...
The bank can't convey marketable title until the redemption period expires and the Sheriff's Deed issues. If the mortgagor redeems the bank has nothing to sell to you. The deal can't close until (1) the redemption period ends, (2) the mortgagor abandons the property and the court decrees the redemption period terminated, or (3) the mortgagor waives redemption in writing.
With all due respect it appears that Windtimber is not familiar with Alabama law. The sale can occur before the redemption period expires. When a bank forecloses on a piece of property they receive a Foreclosure Deed at the time of the foreclosure sale. This deed vests ownership in the foreclosing bank giving them marketable title. In Alabama the redemption period is one year from the date of the foreclosure sale. The original mortgagee and his family have the right to redeem as well as any other entity with a vested interest in the property. This includes subordinate lien holders (2nd mortgages, judgment creditors, etc.).
While it is advantageous to have a waiver of the right to redeem it does not remove the risk inherent in foreclosure properties due to the broad ability of others to redeem. If you purchase the property with a purchase money mortgage the title insurance company may require a redemption bond in order to provide affirmative coverage over the right of redemption. Affirmative coverage means that the title company is going to insure the property and not make an exception to the redemption rights. The cost of such a bond is $10.00 per $1,000.00 of the sales price. Otherwise, you will acquire a special warranty deed subject to the right of redemption for the one year period.
In the event the property is redeemed they will have to pay the foreclosure sales price plus 12% per annum as well as any reasonable costs of repairs NOT improvements. If the foreclosure price is greater than the amount you are spending on the property then you are ok; you will recover your entire investment (i.e. foreclosure price $100,000.00; your sales price $80,000.00). If the opposite is true you need to be very cautious.
With all due respect to jbgarlin, and based on nearly 30 years of providing title opinions [albeit in a state other than Alabama], the bank is not passing marketable title, either with a "foreclosure deed" or a "special warranty deed" if the property remains subject to redemption. The fee is subject to divestment if the mortgagor redeems prior to the end of the redemption period. Rereading both my post and jbgarlin's post, I think we're both saying the same thing. Except that jbgarlin offers a means to insure against the possibility of redemption and get your money back if it happens. In my practice "insurable title" and "marketable title" do not mean the same thing. I'll admit, I'm not in Alabama and title standards may be different there.
I did misstate when I said marketable title. I did mean insurable title. Nevertheless, the deal can close prior to the redemption period ending, a waiver or the right to redeem or the abandonment of the property by the mortgagor. BTW, the mortgagor is required to vacate the property within ten days notice of the foreclosure sale otherwise they forfeit their right to redeem.
im trying to purchase a forclosed home in Alabama and i know the guy who lost the house what do i need to do if he agrees to waive his right of redemption ... can i get by with out a lawyer are there any standard forms out there . any help would be great . p.s thanks for the threads they were very informative
With all due respect it appears that Windtimber is not familiar with Alabama law. The sale can occur before the redemption period expires. When a bank forecloses on a piece of property they receive a Foreclosure Deed at the time of the foreclosure sale. This deed vests ownership in the foreclosing bank giving them marketable title. In Alabama the redemption period is one year from the date of the foreclosure sale. The original mortgagee and his family have the right to redeem as well as any other entity with a vested interest in the property. This includes subordinate lien holders (2nd mortgages, judgment creditors, etc.).
While it is advantageous to have a waiver of the right to redeem it does not remove the risk inherent in foreclosure properties due to the broad ability of others to redeem. If you purchase the property with a purchase money mortgage the title insurance company may require a redemption bond in order to provide affirmative coverage over the right of redemption. Affirmative coverage means that the title company is going to insure the property and not make an exception to the redemption rights. The cost of such a bond is $10.00 per $1,000.00 of the sales price. Otherwise, you will acquire a special warranty deed subject to the right of redemption for the one year period.
In the event the property is redeemed they will have to pay the foreclosure sales price plus 12% per annum as well as any reasonable costs of repairs NOT improvements. If the foreclosure price is greater than the amount you are spending on the property then you are ok; you will recover your entire investment (i.e. foreclosure price $100,000.00; your sales price $80,000.00). If the opposite is true you need to be very cautious.
Great info! I purchased a house in Alabama (actually twice), that the second mortgage company wishes to now redeem. The first time purchasing was with the second mortgage company, before they discovered they owned the 2nd and not the first mortgage.
I purchased the property for more than the list price and wondering if I need to be very concerned based on your comment. Both times purchased through a Realtor, not at auction. Other question I have is the reasonable amount of expenses that can be included in the redemption payoff or any other advise you can share.
I suspect the 2nd mortgage company is trying to buy back to resale to me from our original deal - not knowing that I have already purchased the property. No way i'm buying the property a third time - i'm slow, but i can finally take a hint that it's just not to be.
I just asked about this on the Mobile Forum....these threads are very helpful.
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