Right of Redemption and Foreclosure
Many states provide a right of redemption for owners of foreclosed property. This means that a homeowner has a right to “redeem” their foreclosed property for a certain period of time after it is sold at a foreclose sale by paying off the balance of the loan, plus interest and foreclosure costs. When exercised, the owner can get his or her property back.
In practice, this right is rarely exercised, since a homeowner in foreclosure is unlikely to be able to come up with the money to pay off the entire balance of the mortgage.
For investors who buy foreclosed properties, the existence of a post-sale redemption right can be problematic, as the former owner has a chance of reclaiming the property after it has been bought by a third party.
One option for dealing with this is to buy the right of redemption from the previous owner. If the laws of their state allow it, most homeowners facing foreclosure will be happy to sell a right they never plan to use.
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Last Modified: 04-25-2012 02:32 PM PDT
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