When a person buys a foreclosed property, they are acquiring a property on which the previous owner did not pay the mortgage or property taxes. Buying a foreclosure may be easy or complex, depending on which stage of the foreclosure process the property is in. There may be several legal issues to address, depending on the property, the parties involved, as well as state laws.
- Will I Work with the Lender or Property Owner When Buying the Property?
- Can I Negotiate for the Lender or Property Owner to Make Improvements?
- What Happens If I Purchased Property with Tenants Living in It?
- What Does Statutory Redemption Mean?
- Do I Need to Talk to a Lawyer about Buying a Foreclosure?
It depends on what stage of the foreclosure process the property is in who is selling the property. If dealing with a creditor or the county, the buyer should not expect to quickly contact them or reach a deal right away. Most of the properties are usually supervised by asset management departments, who can sometimes be difficult to reach.
Purchasing property in pre-foreclosure is often easier. The buyer works directly with the property owner in this situation. This also may allow for more direct contact and transacting with the property owner.
In many cases, the properties are usually sold “as is.” This means the buyer is obtaining the property in condition ranging from good to in need of repairs. Many states have “buyer beware” laws. These laws generally hold the buyer responsible for taking reasonable steps to determine the condition of the property, including safety or health risks that may be involved.
The offer a buyer makes for a foreclosed home should depend on the condition of the property. If the property needs major repair, a buyer may want to adjust their bid to factor in post-purchase expenses.
On the other hand, a buyer is not allowed to make any misrepresentations regarding the property during the sales negotiation process. Doing so may result in a contract violation and can lead to legal liability.
Prior to 2009, tenants living in a foreclosed property lost their leases. According to the Helping Families Save their Homes Act of 2009, leases continue during and after the foreclosure. For people on a month-to-month tenancy, they will have to leave after receiving a 90-day notice or whatever the applicable state law requires.
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Statutory redemption refers to a property owner’s right, as given to them by a state statute, to regain the property after the property has been foreclosed on. Statutory redemption laws often outline a specific amount of time in which the previous owner can pay the money owed to redeem property.
The money owed is the amount the property was sold for at a foreclosure auction. Although the specific time frame varies from state to state, the owner usually has a year to redeem the property.
It is very unlikely that you will need help from a lawyer to buy a foreclosed property. Typically, foreclosed properties are sold as/is, which means that the buyer will have little recourse if they discover that the property will need more work than they first imagined.
However, if the seller made material misrepresentations, then there is a chance that the buyer will have a chance to recover their losses. However, material misrepresentations are like if the seller didn’t have the right to sell the property and went through serious efforts to hide that from the buyer.
If you find yourself in this situation, then it will be in your best interest to contact a real estate lawyer. But keep in mind that a lawyer can only help in these types of situations, and it’s important that you have the documents to prove the circumstances.