At any point after the notice of default (Step 2 from yesterdays blog) has been filed with the court the debtor may exercise their right of redemption. This enables the original buyer or related parties to stop the foreclosure proceeding by purchasing the property in full. The specific time frames and fees that can be included in the required right of redemption payment vary from state to state.
There are two type of redemption, equity of redemption and statutory redemption. Equity of redemption is available in all states from the time of the filing of the default until the property is sold at the foreclosure sale. Once the property is sold the equity of redemption right is closed. To use the equity of redemption right the original buyer must pay in full the underlying debt plus all fees, interest, and costs accrued during the foreclosure procedure.
The right of statutory redemption comes into play once the property has been sold to a new buyer at the foreclosure sale. This is a right available in many, but not all states. Each state has differing procedures and time frames for this process. The original buyer will have a set period of time to “purchase back” the property from the new buyer by paying in full the foreclosure sale price plus fees and costs incurred by the new buyer.
Tomorrow, the Tax Consequences of Foreclosures.