Redemption Period

What exactly is a redemption period ? My understading of it is that once you purchase the house at auction you have to wait a certain period of time to resell or put money into it to fix it up. Your you might lose that money that repair money you put in.

The redemption period is the time that some counties allow a former owner to reclaim his/her property by repaying the auction bid amount plus a penalty. In Texas, for example, the redemption period is 6 months and the penalty is 25%.

what are oyur experinces with this?
What percent of the time do they try to get it back from you

The problem with a previous owner getting their property back during the redemption period is that they can’t get another loan.
With a foreclosure on their record, unless someone miraculously bails them out (and why didn’t those people do it before auction??) with cash to you, there is no way they can get financing.

could another investor help them get it back after it has been sold at auction or is it just them. The couple got a divorce and the home goes to auction in a few weeks.

I am not sure if the redemption rights can be sold. However, why would an investor help the same homeowner that lost the home due to foreclosure?? :rolleyes That’s just asking for trouble.

I wanted to mean could the home owner sell the rights to redmetion

If there is a 25% penalty for the redeeming homeowner then his redemption rights really have no value.

This pertains to Michigan, and Michigan only, as that’s the only place I have experience with.

In Michigan, the redepmtion period is 6 months. I’m NOT exactly sure what the penalty is, but it is typically a few thousand more than what they owed.

I, personally, would NOT buy at Sheriff’s Auction, because the people have 6 months, you have no way to see the property, other than a drive-by. The homeowners can, and DO trash the place because they are being foreclosed on. (The whole if I can’t have it noone can attitude) I’ve seen and heard of Cement being poured in the toilets and sinks, taking a sledgehamer to all teh walls. (yes every single wall in teh house had huge holes in it) taking out the electrical boxes, you name it.
Besides THAT, that is 6 months that you can’t do anything, unless they leave on their own. You can’t fix anything, show anything, do anything at all.

In Michigan you can deed your right to redeem. We do this when trying to do short sales sometimes, not for the benefit of the shorting lender, but to who we are flipping it to. If for example, the property is worth $200K, but they were only foreclosed for $150K. You could offer them $5-0K for their redemption rights, and then pay off the loan in full to redeem it for yourself.

Thanks all I can think of right now.

I have never seen or even heard of someone actually exercising their redemption rights. You can avoid this problem altogether if you contact the owner before the foreclosure and purchase directly from them.

I have never worried that someone may redeem the property. You can sell the property prior to the end of the redemption period, but you cannot provide a title policy and your customers cannot get a loan. I usually make an effort to find the previous owner and if they are deceased or otherwise unfindable, I’ll feel pretty comfortable selling the property with owner financing during the first 6 months.

I suppose that, if you got a really great deal at the sale, the redemption right may be attractive to someone. But remember, there are a lot of obstacles to exercising that right (as mentioned in previous posts) and you are dealing with someone who couldn’t handle the obstacle of paying her taxes.

P.S. I’m in Texas. And I typically deal in raw land, so redemption may be more common for single family homes than my experience reflects.