Definition and Examples of the Right of Redemption
If your lender has foreclosed on your home or it’s been seized for unpaid taxes, there may be a period of time when you can pay the amount you owe and reclaim it. This redemption period is known as the right of redemption. Many states and the federal government offer a redemption period. In foreclosure cases, the redemption period is often determined by whether the foreclosure is judicial or non-judicial. In a judicial foreclosure, the lender must sue the borrower in court and obtain a judgment before the property can be foreclosed on. In a non-judicial foreclosure, the lender doesn’t need a court judgment to begin foreclosure proceedings. The type of foreclosures allowed and the timeline will vary depending on the state you live in. If a property has been seized for nonpayment of property taxes and sold at public auction, the Department of the Treasury also provides a right of redemption. Owners can redeem the property within 180 days after it’s sold by paying the purchaser the amount paid for the property plus 20% interest.
Alternate name: Statutory right of redemption
How Does the Right of Redemption Work?
There are a few instances in which your home can be legally taken on account of the monies you owe. For example, when you take out a mortgage, your lender uses your home as collateral to secure the loan. So if you stop making mortgage payments, your lender can foreclose on your home and sell it to recoup the proceeds. Or, if you owe property taxes, the property may be levied and sold to collect what you owe. If any of this happens, you may have a path to regain ownership of your home. This is called the right of redemption, and it can play out differently depending on where you live. In a foreclosure, you may be able to redeem your property post-sale by paying the foreclosure sale price or by paying the full amount owed, as well as any additional charges. For instance, Florida only allows judicial foreclosure proceedings. And borrowers there have the right of redemption up until the later of one of two dates—either when the court clerk files the certificate of foreclosure sale or the time specified in the decree of foreclosure. South Carolina also requires a judicial foreclosure process, but there is no right of redemption once the property is sold.
Requirements for the Right of Redemption
In general, all states allow owners to pay their debts in order to keep their property before it is sold in foreclosure. You can request a payoff quote from your lender to find out exactly how much you owe. But the laws surrounding the right of redemption post-sale can vary significantly from state to state for foreclosure proceedings. Check out the laws in your state and talk to your mortgage lender to better understand your options. If your property has been seized and sold to satisfy a tax lien, you (and your heirs and any person with an interest in the property) have the right to redeem it no matter where you live. However, the recovery price can be steep. You have 180 days after the sale during which to contact the successful bidder and pay them not only the sale price but also a 20% annual interest rate, compounded daily. Once you’ve recovered your property by making the required payment, request the certificate of sale from the purchaser and contact the IRS. You may have an opportunity to get your property back, even if your home has already been sold at auction or as a foreclosure. But your best course of action may be to contact a foreclosure attorney. They should be able to inform you about the right of redemption laws in your state and provide other guidance unique to your situation.
