Seller in redemption period of foreclosure - Buyer question

I signed a l/o last year and was informed that the house would be sold at foreclosure sale about six months later (seller didn’t pay his mortgage). A significant portion of my rent was to go toward equity, but I paid nothing down. I have been withholding rent payments (only since I found out about the foreclosure sale) until I figure out what is going on. If the seller tries to evict me, do I have any choice but to pay up, or can I argue equitable interest plus moving fees as damages. The option period is two years from signing (could have exercised next year). The redemption period ends next month, and I am not in a position to exercise the option now, but would have liked to next year.

Two questions:

  1. How likely is it that the whole contract was fraudulent (given the timeline, do you think the seller ever paid any mortgage payments)?

  2. What would you do, taking into consideration the cost of fighting this?


1. How likely is it that the whole contract was fraudulent (given the timeline, do you think the seller ever paid any mortgage payments)?

Fraud comes down to a question of intent. Did the seller enter into the contract, knowing that he would let the property go into foreclosure and be unable to perform on his contract? Kind of hard to prove given the six month timeline, especially if the seller made any mortgage payments (even one) since you lease optioned the property.

2. What would you do, taking into consideration the cost of fighting this?

Consult with an attorney anyway. Often you can get a free initial consultation to determine if you have a viable case. If you file suit for damages, the seller could countersue for the unpaid rent. The damages may just cancel each other.

Personally, I would consider that I just got six months free rent and let the matter drop. I would continue to stay in the property rent free until served notice to vacate which may not happen for another six months depending upon how slow evictions are processed by the county.

If the property is taken back by the lender at the foreclosure sale, they may allow you to continue renting at a much lower rent than you are paying now. If an investor wins the auction, you may be able to stay and pay rent or even negotiate a new lease option agreement with even better terms than you have now.

Just my opinion.

You can talk to his bank and try to assume his mortgage. At the foreclosure proceedings yo have a right to be heard because you have a vested interest in the property.

If he’s getting foreclosed on you can either take control of the property or you can try to sue him for the equity that you would have had, had you exercised the option.

This is a tough situation and I wish I had a better answer for you. I agree with Dave that you should stay there as long as possible without paying any more rent & to consult an attorney to see if there is anything else you can do.


I would look for an attorney that specializes in fighting foreclosures in court!


I would not let this guy off the hook!

It may be possible in many areas of the country, due to the “backlog of foreclosures” in the courts, to get his foreclosure prceeding delayed for many, many months, via a good attorney, by filing motions on your behalf against this seller/landlord who harmed you!

I’m not a lawyer, but from what I hear, it could take some months for a new motion to be heard by the courts, in certain areas of the country.

So if you can, I would “return the favor” and maybe you could wind-up staying in the property rent free for another year (or longer!)…

Plus you could try to get the seller/landlord to just quit claim you the house. And then your attorney, could present your original contract, that you were paying in good faith (maybe you could even set-up an escrow account, with all the unpaid monthly rents, and try to use it as a “bargining chip” with the lender! In this way you can show that you had good intent and wanted to pay, but the actions of your seller/landlord defaulting on both his mortage and defaulting on your option, forced your hand to “withhold” rents).

Who knows what these lenders may do, if some pressure is put on them by the legal system (your attorney). It could be as simple as having you name added to the note and mortgage by the lender.

So if this seller deeded you his property, and the lender modified the loan to add your name on it, you may be able to negotiate all the past due payments to the end of the loan, and you can show good faith to the lender by giving them a lump sum of money towards the principal. These are all just “way out there” scenarios, but you never know until you try!

But getting back to this “bad seller/landlord” who defaulted on your lease/option;

…“take him to the cleaners”;

…by staying in the house for as long as an attorney can “stretch the rubber band” before it breaks!

Now, from what I’ve been told even if the property does get foreclosed on, now the lender must then go through a different court system, and then file for your “ejectment” or eviction.

Who knows? Maybe your attorney can use the same valid arguments in this new “court venue” (ejectment/eviction) and get you another 6-12 months or more free rent!

So, take the money you potentialy saved (maybe 1 to 1 1/2 years or more or free rent!) and now go and make another good deal, hopefully with an honest seller/landlord!

Good Luck!

A healthy and happy holiday season to all!


P.S. I’m not an attorney, I wanted you create some scenarios for you, that may or may not have “legal merit”. You need to discuss these thoughts with a lawyer!

You guys are something else.

Dd it ever occur to you that the seller got pushed into foreclosure because this clown got moved in with nothing down and then admits he refused to pay rent.

two peas in a pod. LOL.

i suspect this will not be the last time we see this story

if i were you i would just go talk to an attourney - every state is different and every lender is different too.

No, this does not fit the facts as stated in the original post. Rent was paid up until the notice of foreclosure was received. After that, the lender has a right to assignment of rents. The tenant should be escrowing the rent just for the unlikely event the lender exercises their right to assignment

I agree wih rbdjr’s response too:)