While people who are being foreclosed on have rights, you as an investor must be conscientious of those rights while still knowing when it is time to stand up for your own rights. Yes, believe it or not, foreclosure investors have rights, too. Let’s take a look at one of these laws that is meant to protect the individual losing the home and how you can use the same law to help protect yourself.
The Right of Redemption law gives the previous homeowner, the one whose house was just foreclosed on, a certain amount of time after the sale of the foreclosure to “redeem” their property. This can be a big pain for foreclosure investors who are on a strict time crunch to get the house remodeled and back on the market for a profit.
While the homeowner should have a chance, this can wreak havoc on the nerves of a foreclosure investor. It is important to be extremely careful because your profitable investment could wind back up in the hands of the default borrower again and you could be out a lot of money. Be sure to work this redemption time into your overall plan.
While people who are being foreclosed on have rights, you as an investor must be conscientious of those rights while still knowing when it is time to stand up for your own rights.
CC image courtesy of Jay Santiago
It is important to know the Right of Redemption period of the jurisdiction for the property you are trying to purchase. Each state varies and different counties or parishes within those states could have their own laws. Some periods can last up to a full year, giving the previous homeowner plenty of time to work their way out of their foreclosure issue. Some areas in Florida, on the other hand have time frames as little as one day.
Until the period of redemption is up, you should really hold off on doing any repairs. The last thing you want is to have a fully remodeled home when the homeowner decides to reclaim their property. If this happens, seek legal advice because the owner, technically, does not have to pay you anything for your work. The only thing they are responsible for is back taxes and any other mortgage and insurance fees associated with repossessing their house. The best way to avoid this is know the law and be willing to wait to take possession and to do any remodeling.
You do have the option to purchase Redemption Rights from the owner at the time of sale. Many times buying these rights will put you out another couple thousand dollars, but you will be able to proceed with your plan. Many owners, if they are being foreclosed on, are in no position to exercise their redemption rights to begin with, but the last thing you want is the off chance that it happens.
You can also try to buy the rights from an owner and then “reclaim” the house after it is sold for a fraction of the price at auction. This is a risky move and it helps to have a realtor and a real estate lawyer on your side.
You do have rights as a foreclosure investor. While those rights must come second to the rights of the previous homeowner, they are rights nonetheless. If you have any questions about all of your rights as an investor, be sure to seek legal counsel with a foreclosure attorney.
Hi. My name is Adrian Fogerty. I'm fortunate to blog about investments. I'm an expert author at NorthShoreBand.