Can I Get My House Back After It Is Sold in a Foreclosure Auction?
Getting a home back after foreclosure is called redemption. In about half of all states, state law provides for a redemption period after the sale, sometimes for limited types of property or in limited circumstances. In nearly all of these states, to get the home back, you have to repay the outstanding loan balance plus all accrued fees and foreclosure costs. Within these states, however, the question isn't so much whether you can get your house back, but would you want to?
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Redemption Time Periods
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Time periods for a redemption vary widely. In North Carolina the redemption period is only 30 days. In Maine it is 90 days for most loans. In Michigan it ranges from 30 days to one year, depending on several factors. In Tennessee and, under limited circumstances, in California, the redemption period is two years.
Redemption Criteria
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Often redemption is only allowed when the foreclosure has occurred by a judicial process. About half of the states require a judicial process. In most of the remaining states the lender can choose either a judicial or nonjudicial process. Not surprisingly, lenders with the choice nearly always choose the nonjudicial process, to prevent redemption, cut costs and shorten the process. In some states special rules apply. In Alabama, for instance, a borrower must surrender possession of the property within 10 days of the foreclosure to preserve a one-year right for redemption.
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Underwater Mortgages and Redemption
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In the distant past, a foreclosure might have occurred because the borrower was hospitalized or otherwise too incapacitated to look after the bills. Had the owner been able, he could have sold the house rather than let it go into foreclosure. If he recovered during the redemption period, he could refinance the mortgage, especially if it was small, and buy the home back. But post-2006, most homes going into foreclosure have been "underwater" -- the outstanding mortgage balance is more than the value of the property. In instances like this, it does not really make sense to redeem a property, even if you could. No bank will finance the property to the level of the balance due. And even if you won the lottery and now had enough cash to buy the home back, you might be able to buy twice the house on the open market for the same price.
Buying After Redemption
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If your home is ultimately sold to an investor or nonprofit who paid pennies on the dollar of the loan balance, you have nothing to lose by asking if he would be interested in selling the place back to you. Even allowing for his profit, the price would likely be substantially below what you had owed on it. A problem here, of course, is that by the time you have been foreclosed upon your credit would not sustain an approval by any mortgage lender. If the investor bought your home paying all cash, however, you could ask him to carry back the loan or sell you the house through a lease option, which would allow you time to build back your credit. Boston Community Capital, a nonprofit organization in Boston, has successfully purchased foreclosures and sold them back to their owners in just this way, according to The Boston Globe.
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References
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