Can a Lender Sell a REO Property During the Right of Redemption Period?
Some states have redemption periods after a house is taken by foreclosure. This is a time span in which the former homeowner cannot legally be evicted, and in which he may attempt to reclaim his home. A house can be sold in this period but, in practice, some lenders hold off.
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Sale
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Foreclosure procedures and laws vary by state; but, generally, once the lender has served proper notice of the foreclosure, it may then post notice of sale and sell the property at auction. This can occur regardless of any state redemption period. If the state redemption period is short, however -- a few days to a month -- the lender will often avoid complications by delaying the sale until the period is over.
Redemption
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If your home has been sold during the redemption period, in order to redeem the property, you must pay the new owner his full purchase price, with interest from the sale date at your old mortgage rate. You may also be liable for other costs, such as insurance or taxes.
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Know Your Rights
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Your lender will not necessarily let you know of all your rights under the redemption period. Once the company has foreclosed, it would rather get the property sold and off its books quickly, so you may be told that you have to move immediately. Ensure that you research your state's laws on redemption periods thoroughly so that you can assert your rights confidently. If you are still within the redemption period, you can live in the house for the entire period, even if it has been sold to a new owner.
Buyers
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If you are attempting to buy an REO property -- that is, one that's been foreclosed on and is now owned by the bank -- you should be aware of your state's redemption period laws. If you buy a house that's within its redemption period, the former owner still has the legal right to live in the house, and he does have the right to buy the house back from you if he is able, so you may have gone through the hassle and expense of buying for nothing.
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