REOs and Rights of Redemption

is no right of redemption on an REO. You are thinking about tax sales where the owner has 1-3 years depending on where you live to redeem the property.

On an REO the owner has lost the property and it has gone back to the lender now the lender owns it (PERIOD). That means it has already been foreclosed on and they are now trying to sell it to get some of their money out of it.

So you are dealing directly with the lender not an owner.

I'm totally confused now. Why then on every MLS foreclosure listed, would they state the following (actual copy from MLS)...

BANK OWNED PROPERTY SOLD AS IS WHERE IS NO WARRANTIES SUBJECT TO ALABAMA FORECLOSURE LAWS AND 1 YEAR RIGHTS OF REDEMPTION

OR

BANK OWNED PROPERTY SOLD AS IS WHERE IS NO WARRANTIES OR REPAIRS SUBJECT TO ALABAMA FORECLOSURE LAWS AND 1 YEAR RIGHTS OF REDEMPTION

I'm with you on the tax sales and here it is 3 years.

that disclosure is wierd to say the least, but maybe they use this disclosure for both REO and TAX sales?, SULLY.

with the tax lien....but the msl listing saying that makes me say it's local to bama....dont know why or who has the redemtion period...maybe you as the buyer of the REO...

Here is an additional listing off of a Real Estate company web site that actually list the date of foreclosure and I assume the date the clock started. I just noticed this when I was researching for something else. In this case, given the Rights of Redemption, there are only a couple of months one would have to wait. It also tells me this home has been on the market for some time.

Sold subject to any and all rights of redemption due to foreclosure 9/28/07. Sold in AS IS condition; no warranties expressed or implied.

ALABAMA.....that place is a wold in its own. I lived in Mobile for years and that is where my family owns most of its property. That is standard in REO and STATE TAX sales, they are just too cheap to change th verbiage so they use the SAME contract agreement for BOTH. Not to worry there is NO redemption for REO just the Tax Sales.

I have had my experience with that myself, if you had said you were in Bama I could have told you that first thing...lol....GO TIGRERS!

in my above post, that they may just use the same disclosure for REO's, SULLY.

Careful:-) There is as much $ to be made here as anywhere. We just need to get our act together. Thanks for the input!!!

That takes care of most of my question from my original post, but could you guys still look at #2 and #5. Would like to get a little more info regarding those two questions. Thanks again...

That I agree with you on 100%. I actually started a group on here for investors interested in properties down south - especially Alabama. I just got 2- four plexes in Mobile off Government street downtown last month. So hey - I am with you 100%

Ok guys, still struggling with this. In Dean's book #4 that you get when you order the package (this is also in his hardback) on page 11 of #4 "Foreclosures Made Easy", he talks of the "Redemption Rights". Does this not apply to the REOs? I have heard over and over again that the buyer has the right to redeem to property (not from a tax sale, but foreclosure) anytime within the period mandated by a state. My state it is 365 days as it is in several others listed in the book. In reading through this again, it seems to me the original owner has the highest right of redemption during that period.

where there is a right of redemption on foreclosures, the original owner would have to pay the bank back the ENTIRE amount that they owed plus all other cost like foreclosure cost, legal fees, title transfer fees to you and etc. So lets say they were foreclosed on for 400K and it took another 40K to foreclose and you got it for 225K. They would have to pay the bank back the 400K + 40K + any fees incurred in transfer/sale to you. So the probability of them being able to do that is near impossible if any.

I have heard any of the lenders say that anyone they had foreclosed on had come back to redeem property.

that right of redemption is most foreclosure laws are for the junior lien holder, such as the 2nd or 3rd holder.

Here is what I found on it:

In Quinn Plumbing v. New Miami Shores Corp. 129 So. 690 (Fla. 1930) the Florida Supreme Court stated "Such a redemption, after foreclosure and sale, by the junior mortgagee, who is under no legal obligation to redeem, amounts not only to a redemption, but as against the purchaser who is complainant here, amounts to a purchase of the rights acquired by the purchaser at the sale under the senior mortgage. It is unnecessary therefore that complainant offer to convey as such a redemption by the junior mortgagee would, by operation of law, invest in him indefeasibly the title of the purchaser at such sale"

Florida is a judicial foreclosure state.

It is my understanding that In Florida, the property is redeemed by any third party defendant who chooses to exercise that right. That means, the defendant acquires the property and does not acquire the mortgage or judgment. Any defendant, but the property owner in default, who redeems takes title as if he had stood in the shoes of the foreclosing plaintiff. So, to the extent liens junior to the foreclosing plaintiff are eliminated in the foreclosure, the third party defendant who chooses to bid at the foreclosure or who later redeems (because he wasn't included in the original foreclosure) takes title free of those junior liens.

I suppose any party has the right to negotiate an assignment of the lien during the pendency of the foreclosure. However, after judgment is entered in a foreclosure proceeding, there is no longer any mortgage as it is said to merge into the judgment. After a sale occurs, the party validly exercising a right to redeem (who was not named or served in the original action), has the right to acquire the title free of the claims of the purchaser, generally.

There is a famous line of cases generally referred to as Sundie that could give more insight into what happens when there is a sale prior to exhausting all appeals by a defeated party defendant and then a successful and timely appeal overturns the sale.

Of course, if the original owner in default exercises his right of redemption, it merely eliminates the lien of the foreclosing plaintiff (whose claim is paid by the redeeming owner) but reinstates all the junior liens.

Vermont has a strict judicial foreclosure statute (Title 12, Vermont Statutes Annotated Chapter 163), however there is very little case law that deals with the effects of a redeemed property. The one case I know of is First Vermont Bank & Trust Co. v. Kalomiris, 138 Vt. 481, 418 A.2d 43 (1980). In this case there was a redemption by a junior lienholder (TRE was the second mortgagee). The Vermont Supreme Court held that the redemption merely satisfied the first mortgage. The appropriate part of the decision provides:

"Kalomiris' equity of redemption would have been forever foreclosed had TRE or one of the other named defendants not redeemed. Ward v. Seymour, 51 Vt. 320, 324 (1878). But when TRE, as second mortgagee, redeemed the premises it was a satisfaction of the judgment of foreclosure, and TRE became by operation of law subrogated to the rights of First Vermont Bank in the mortgaged property. Id. See also Phelps v. Root, 78 Vt. 493, 498--99, 63 A. 941, 942 (1906); Wheeler v. Willard, 44 Vt. 640, 644--45 (1871); Bullard v. Leach, 27 Vt. 491, 495 (1854). In effect, TRE became first mortgagee, as well as second mortgagee, because when the judgment of foreclosure was satisfied it had the consequence of 'keep[ing] the mortgage on foot.' Wheeler v. Willard, supra, 44 Vt. at 644. Therefore TRE was not entitled to a writ of possession, since it did not foreclose on Kalomiris' equity of redemption, either by cross claim in the original foreclosure action or by an independent action. Ward v. Seymour, supra."

Personally I think you are worrying about something that may never happen unless that 2nd lien holder is holding a vast amount on the property when it is foreclosed on, and if that is the case I would not mess with it anyway because of this exact reason - they would more than likely bid on it or make offer on it to take possession in case of foreclosure.

is after the foreclosure! The owner has a redemption period during the foreclosure procces. REO...is now the bank owns it...original owner is out of the picture.

yes in some states its on REO's as well. it generally applies to the lenders that originally held the 2nd and 3rd on properties. It gives them a right to redeem property by paying off the 1st (which was what was foreclosed on) as well as all other fees. Like I said you will probably never see that happen unless there is a huge 2nd on the property.

And if the original owner pays off foreclosure before it goes final - then it automatically reinstates the junior liens.

Thank goodness for the ones who go before you. Great info and I am appreciative to all who took time to comment.

I just happen to know that Alabama, Mississippi and Louisiana all fit the titles of "THOSE CRAZY STATES" that are libel to have almost anything this crazy still on the books. Good luck and I look forward to meeting you later this month when I get to Mobile