Notice of redemption: A notification advising a homeowner that if their mortgage balance is paid, they can halt the foreclosure process.
Notice of redemption: A document notification issued by the bank that advises homeowners that they expect repayment of the full due amount of the mortgage, which will result in a complete annulment of the bank’s claim on the property.
Notice of Redemption: Buying Back a Home After Foreclosure
Although all states allow homeowners to redeem the home before the foreclosure sale takes place, only a few afford homeowners a redemption period after the foreclosure sale.
A home can be redeemed by paying off the outstanding balance, as well as fees, costs and interest prior to the foreclosure, or by paying off the full mortgage balance, as well as costs and interest, after the after the foreclosure sale.
States with judicial foreclosures usually grant homeowners the right of redemption after foreclosure, allowing a homeowner to redeem the property before the court confirms the foreclosure sale. States with non-judicial foreclosures usually provide no redemption period.
To redeem a home after the foreclosure sale, the homeowner must meet all the requirements outlined in the notice of redemption, including informing the buyer and the court of the plan to redeem and paying the redemption amount.
The redemption period varies from state to state. In Michigan, for example, “For most homes, the redemption period is six months. If your property is more than three acres and used for farming, or you have paid more than two thirds of your mortgage, your redemption period is one year,” according to Michigan Legal Help, which is sponsored by The Michigan State Bar Foundation.
The redemption period also guarantees certain rights for the buyer that purchased the foreclosed home.
In Michigan, “The buyer of a foreclosed home has the right to inspect it during the redemption period. The homeowner cannot unreasonably stop the buyer from inspecting the home. If the homeowner refuses an inspection, the buyer can evict them. If the buyer finds damage to the home, the buyer can evict the homeowner. If the homeowner repairs the damage before the eviction hearing, the judge will not evict them.”
In states that do not provide a redemption period, such as Texas, the right of redemption is restricted to “sales for unpaid ad valorem taxes, in which case a former owner of homestead or agricultural property has a two-year right of redemption (for commercial properties, the redemption period is 180 days); and HOA foreclosure of an assessment lien, in which case a former owner may redeem no later than the 180th day after notice,” according to Houston attorney David J. Willis.
During the redemption period, the former owner may not occupy, possess, or sublet the property. Tex. Tax Code § 34.21(h).
Texas law also says that “The owner of real property sold at a tax sale to a purchaser other than a taxing unit that was used as the residence homestead of the owner or that was land designated for agricultural use when the suit or the application for the warrant was filed, or the owner of a mineral interest sold at a tax sale to a purchaser other than a taxing unit, may redeem the property on or before the second anniversary of the date on which the purchaser’s deed is filed for record by paying the purchaser the amount the purchaser bid for the property, the amount of the deed recording fee, and the amount paid by the purchaser as taxes, penalties, interest, and costs on the property, plus a redemption premium of 25 percent of the aggregate total if the property is redeemed during the first year of the redemption period or 50 percent of the aggregate total if the property is redeemed during the second year of the redemption period.”
Given that redemption rules and rights vary greatly from state to state, a homeowner facing foreclosure should seek legal counsel after receiving a notice of redemption or when weighing their redemption options.