What Is a Redemption Period?

Redemption rights come in two forms. The equitable right lets a borrower stop a foreclosure before the sale by paying off the whole debt. The statutory right, which exists only in some states, lets the owner buy the property back after the sale, for a fixed period that can run from weeks to a year or more depending on the state and the type of sale. The redemption amount is usually the sale price plus interest and allowed costs. In some states junior lienholders get their own window after the owner’s expires, and tax sales carry separate redemption rules.

Redemption periods affect a wholesaling business on both sides of a deal. A buyer who wins at auction may not get possession or insurable title until the window closes, which ties up money and rules out a quick resale. On the lead side, a recently sold house in a redemption state can still produce a conversation with the former owner, who may be trying to raise the money, may want to sell their redemption rights, or may have moved on. Callers ask what the owner plans rather than assuming. Some states let owners transfer redemption rights to a third party, and whether that is workable is a question for counsel in that state.

The numbers differ so much by state and sale type that mistakes are easy: counting from the wrong date, since the clock may start at the sale or at court confirmation; forgetting that the former owner may be allowed to stay in the home during the window; or overlooking a junior lienholder’s rights. Title companies typically will not insure until the period has run. Treat marketing or reselling such a property as premature until the dates are confirmed in writing.