Right of Redemption in Alabama
I purchased a foreclosure a few months ago. In AL there is a one year right of redemption. I've never had a previous owner excercise this right in the past, however, it looks as though I may be headed toward my first one. My question to anyone who has faced this before is this.........I am half way finished with the rehab. I have approximately 2 weeks left for the house to be in A-1 condition. I have completed (or had contracted) the major rehab items. Do I finish the house and allow the previous owner to reclaim, or do I stop all rehab at this point, and allow her to redeem the property only half completed? Any advise would be appreciated.
Some investors will offer the former owner a few bucks to redeem their property and sell it to them (the investor). The investor sets it up so that they fund the redemption and buy from the foreclosee at the same time. I'm not sure how the law works concerning the repairs you've done. Ronald Starr, who has considerable experience with foreclosure sales and tax sales, would probably know. If he doesn't post on this site, you can probably post your question on creonline.com where Starr frequently advises. Good luck.
I think you may have answered your own question... Why continue to put money, sweat, improvements, into a property that you may have to sell an interest in if the previously foreclosed owner attempts to "redeem"....
Perhaps a better way to resolve this might be to strike an offer with this party so that they get some cash and relinquished or sell their redemption rights to you.
Michael Morrongiello
Sunvest Corp.
I am assuming that the person redeeming the house has no obligation to compensate you for the work performed.
If that is so, why would you want to spend more money on a house that you are going to lose? Unless you are worried that the person will sue you for the "damage" to the house.
Another question: Would it be possible in the future to get a release of these redemption rights from the previous owner? Even with a small payment for the right, it could save headaches like this in the future.
Tom
Joel,
Nice to meet you! Joel I also live in Alabama. A person that has been foreclosed on in Alabama must do 2 things before they can redeem their property:
1. The person must have all of their personal possessions out of the property 10 days after the "Notice of Demand" letter which is sent to the person's house the day of the auction via certified mail.
2. The person must purchase the house with new financing. It is very unlikely that a person that has just been foreclosed on will be able to get a mortgage company to give them a new mortgage to purchase the property back.
In addition, redemption is a lengthy process that must be undertaken by an attorney(which costs money!!). It is very unlikely that the person that has been foreclosed on will indeed be redeeming his or her property unless they just came into some money and can pay all cash to get an attorney and their property back (i.e lottery, rich uncle)
Just call your real estate attorney for further clarification on the matter. I hope I was some help to you!
Rob
Mobile, AL
Why would you start work on a project if the property isn't in your name. Or am I missing something in the redemption. I don't know of a redemption period where I live.
Do you know the redemption regulations?
If the regulations will allow you to make improvements and get paid for them in the redemption, then I'd go ahead and finish as they may not have enough money to redeam.
In Texas the redemption regulations for tax sales allow for the buyer to do improvements and get paid for them upon redemption.
I would go see a good attorney and get the Alabama Foreclosure manual.
rudy-austin
Dear Rudy;
I find your comment very interesting; although i've bought a number of tax liens in TX, and thought I knew VATCS (Vernon's Annotated TX Stats.) on this subject, pretty well, it's news to me that the lien buyer can spend money rehabbing and be entitled to repayment by the redeeming owner, who has 24 months to redeem under TX law.
Would you please give me the Stat. Section Number in TX Stats to which you refer, so I can read and study same?
Thank you.
John Merchant
Dear Ashy
I find your comment very interesting; although i've bought a number of tax liens in TX, and thought I knew VATCS pretty well, it's news to me that the lien buyer can spend money rehabbing and be entitled to repayment by the redeeming owner, who has 24 months to redeem under TX law.
Would you please give me the Stat. Section Number in TX Stats so I can read and study same?
Thank you.
John Merchant
http://alisdb.legislature.state.al.us/acas/ACASLogin.asp
web site listed above click on Alabama Code
You have the right to get all monies invested in the property back. Get a new appraisal of property and give a complete listing/bill of all renovation completed on the property to the redemptionee/and attorney demanding payment of all monies+interest must be paid.
One of many Codes
Section 6-5-253
Payment or tender of purchase money and other lawful charges, with interest.
(a) Anyone entitled and desiring to redeem real estate under the provisions of this article must also pay or tender to the purchaser or his or her transferee the purchase price paid at the sale, with interest at the rate allowed to be charged on money judgments as set forth in Section 8-8-10 (as it is now or hereinafter may be amended), and all other lawful charges, also with interest as aforesaid; lawful charges are the following:
(1) Permanent improvements as prescribed herein.
(2) Taxes paid or assessed.
(3) All insurance premiums paid or owed by the purchaser.
(4) Any other valid lien or encumbrance paid or owned by such purchaser or his or her transferee or if the redeeming party is a judgment creditor or junior mortgagee or any transferee thereof, then all recorded judgments, recorded mortgages and recorded liens having a higher priority in existence at the time of sale which are revived under Section 6-5-248(c).
If the redemption is made from a person who at the time of redemption owned the debt for which the property was sold, the redemptioner must also pay any balance due on the debt, with interest as aforesaid thereon to date.
(5) Mortgagees of the purchaser, or their transferees, are considered transferees of the purchaser, and a party redeeming must pay all mortgages made by the purchaser or his or her transferee on the land to the extent of the purchase price.
If the purchaser's mortgages do not exceed the amount of the purchase price, the balance must be paid to the purchaser.
(b) If the redeeming party is the debtor, mortgagor, their respective spouses, children, heirs, or devisees then, unless otherwise provided herein, the judgments, mortgages, and liens revived pursuant to 6-5-248(d) are not lawful charges as defined in subsection (a).
(c) The purchaser shall be entitled to all rents paid or accrued including oil and gas or mineral agreement rentals to the date of the redemption, and the rents must be prorated to such date. The purchaser or his or her transferee and his or her tenants shall have the right to harvest and gather the crops grown by them on the place for the year in which the redemption is made, but must pay a reasonable rent for the lands for the proportion of the current year to which such redemptioner may be entitled.
(d) Any one entitled and desiring to redeem shall be granted a credit as against the amount of money required to be paid for redemption as follows:
(1) For all timber cut or sold on the land by the purchaser or his or her transferees, during the statutory period of redemption.
(2) For any oil and gas, minerals (including coal bed gas), sand, and gravel, taken from the land or sold, and for advanced royalties or bonuses received by the purchaser or his or her transferees, during the statutory period of redemption.
(3) To the extent the value of the property is diminished when any structures or buildings are changed, removed, demolished, or destroyed by the purchaser or his or her transferees during the statutory period of redemption.
(Acts 1988, No. 88-441, p. 647, §7; Acts 1989, No. 89-525, p. 1074, §1.)
Interesting - I just joined this forum tonight (I found it through an internet search where I was trying to find out exactly what "one year right of redemption" meant). I'm moving to Alabama at the end of May and have been looking at the real estate market, and I have seen quite a few houses I liked that had that stipulation. I had figured out it meant they had been foreclosed on and wondered if this (right of redemption) was something that ever actually happened.
The "one year" part means from the date of foreclosure, not the date of purchase, right?
I'm so looking forward to reading the posts in this forum! I've always been interested in real estate investment, but have lived all my life in the D.C. area, where one really has to be wealthy to get started. The market in Alabama seems to be more realistic, from what I've seen. I have no idea if I have the talent for this type of investing, and I'm hoping this forum will give me some insight
Christine