Several weeks ago I purchased my first home at the local sheriff sale. Unfortunately, before the redemption period was up some other investor “redeemed” the property and I’m left waiting for the sheriff’s office to refund my money. No real complaints from mte, it was pretty smart on the other investor’s part, he paid $40K less than I did at the sale.
My questions are - How does the process of redeeming for an “owner” work???
I assume the investor paid the owner some cash for the redemption rights but how would you protect yourself in that situation? In the competetive Southern NJ market a forclosed owner “owner” could illegally sell redemption rights to 20 investors knowckng on his door!
Also, other than mortgatges and taxes, do other possible liens remain valid or were they dismissed in the sheriff sale.
How wold you go about structuring such a deal? Since only the owner can redeem how would an investor get legal standing to redeem the property?
I’m surprised no one responded to this post. I’m in the same boat - but on both sides of the deal. I was the highest bidder at the auction, but am trying to work with the owner to purchase directly through him by way of redeeming his loan. This way I will get it for less than auction price and will get my cash deposit back.
But I need advice on how to work the deal with the current owner. He wants to stay in the house and I don’t want to force him out. I’m thinking of renting back, or doing a land contract…
I’ve done some investigating since I posted the original message.
You should be able to buy the redemption rights from the owner and redeem the property during the redemption period. The price of the redemption rights might be that you will rent him the property. (IF he can’t pay the mortgage, how will he pay rent that will cash flow the property??) Since the auction already completed there is no realistic way to negotiate with the bank to stop the foreclosure.
In South Jersey where I have been attending the sheriff Sales, to redeem the property you will need the full upset price (price the bank wanted at auction) in certified funds. What you do with the property after that is between you and the previous owner.
Issues to investigate: The redemption may not eliminate judgement liens against the property so you may find liens still attached to the property. I’ve been trying to get answers to this issue but have not been able to get any information. Also, in NJ redemption is not spelled out in the legislation but is implemented in common law. This means redemption is subject to judicial review that MAY disallow a redemption where the previous owner sold redemption rights at a discount to the auction price (previoyus owner didn’t realize he would be getting more from the auction than the redemption).
Note: in SJ it can take several months to get your money back from the Sheriff’s office. I’m still waiting 2 months later despite several phone calls and several visits. Eventually, they’ll get around to it.
Evidently, in my case the investor group got the owner to redeem and therfore there was no judicial review (I believe the the auction prove was $40K more than the subsequest sale price from the original owner to the investor group) or the judge just did a crappy review (also a good possibility). How the investor group protected themselves during this transactions I’m still trying to figure out. I’ve looked at all the recorded documents on this transactions but still have few clues.
I’m with Bluemoon…and I have answered this question the same way with fair regularity and have never gotten a good answer. To me, it just doesn’t make sense to rent a forclosure back to the person that couldn’t afford the property in the first place…
Here’s a third opinion that concurs with those of Keith and Bluemoon. If they couldn’t afford to make the mortgage payments, why do you think they can afford to pay you to rent/lease? Where would your profit center be? Also, if you become emotionally attached to this person, and they don’t pay their rent/lease, how will you deal with that?
Here’s another suggestion. See if you can help them find a place that’s more within their budget.
All very good points and suggestions. Thank you. It’s very hard not to get emotionally involved with people’s situations…which is why I don’t think I will ever buy an occupied property again.
In this situation another, more seasoned, investor is guiding me through the process and encouraging me to do a land contract deal in which I hold the title, as well as 12 months worth of reserves (for mortgage payments should he default) which I will receive when I get the loan to “redeem” the property.
The idea is that if he doesn’t pay, I can evict him, the contract will be void and I can then sell the property for it’s true market value which is $50 thousand more than what I’ll be buying it for.
My biggest fear now is that I could get sued down the road for “taking advantage” of the current owner.
Even though I would be leaving about $15-20 thousand dollars on the table, I’m just about ready to completely walk away from this deal and hand it over to another investor to work. I’m not sure I’m ready for this kind of risk.
I have to tell you that I am in the position of the owner who just went through the foreclosure. I was 3 months behind on my mortgage due to my 3 year old grandsons death. When I tried to make it up, the mortgage company would only take the full amount, not partial. Since I was not able to make the full amount, it kept defaulting every month. To make a long story short, I had some very bad advice from mortgage brokers and a couple of lawyers. My mortgage was not paid for almost a year when they foreclosed. However, I was taking the advice from a broker who told me the mortgage company would settle with me eventually. The lawyer who represented the mortgage company still can’t believe they foreclosed on my house. Life does happen and when you have a small child die suddenly, you are not thinking of paying the mortgage. You are thinking of how fast you can fly 3000 miles to see him one last time.
loristl, I am so sorry to hear about your loss. I really hate to hear about people having to bury their kids or grand kids.
However, I do believe that if you lease the house back to the previous owner, they will eventually, somewhere in the process start to feel resentful that you took their house and there will be problems down the road. They will see you as profiteering on the death of their grand kid. The previous owner as tenant will eventually cause you a problem.
This is the kind of event that creates “good real estate deals”. I call it the four Ds Death, Disease, Downsize and Divorce. Each of these are horrible live events, but they cause 5,000 sqft houses with pools and elevators to go on the market with $200k in equity (divorce) or 4 bedroom 3000 sqft houses to go on the market with $65k in equity (spouse got sick).
Thank you for your comment. I agree with what you are saying. In normal situations, I may feel the way you described. Something happened to me after the death of my grandson. I want to keep my house naturally, but if I have to share the equity I have put in it in order to save it, then I’m okay with that. The main reason I want to save the house is because there isn’t a lot of real estate in the area that fits my needs like my house does. Everything seems to be lacking in either land or rooms or area. I also have my elderly mother living with me and I don’t want to move her because I would have to go through all kinds of work to change her services over.
So I am hoping I can find someone that will buy my house for me and we can work together
why work with forclosures when if you find the right location you can finance a construction loan on a new build and make more money? Why worry about working with homeowners and lenders? too much stress for some. I know people who finance modular home projects and will not touch a project if they dont make 40 grand. He must make his 40 grand because he does this type of projects all the time. To make 40 grand off a foreclosure just doesnt happen often or at all.
There are options out there for you! The number one option is do you have a family member with a different last name? If so sell them the property and let them carry that note for you for a few years. That is your best option
Option 2 if you are still only 3-4 months behind call your bank fax them a hardship letter and ask for a Forbearance on your loan.
That is where I would start that is for sure!!
If you need anything else please let me know!
P.S. My thought and prayers are with you and your family.
If the hardship that caused you to get behind is behind you and you’re now able to make your payment you may be able to do a workout that adds a portion of your back payments to the end of your loan. The lender will generally want 20%-25% of the ammount due to bring you current.
This is better than a forebearance because your payment stay the same. With a forebearance your payment can go up quite a bit for a couple of years.