Purchasing a foreclosed home is a good way to get the house of your dreams at a cheap price. However, there are several risks involved with buying a home this way. One of those risks is that the previous owner may attempt to reclaim the home even though you are now the legal owner. Here's how the person can legally force you to give up your home and what you can do to deal with the issue.
Statutory Right of Redemption
The majority of homeowners stop fighting to keep their homes once the foreclosure process concludes and/or the home has been sold to new owners. However, a small percentage will continue fighting the good fight and may attempt to take back possession of the home using a little-known law called the statutory right of redemption.
About 33 states have laws on the books that allow homeowners to reclaim their homes after the foreclosure process has ended, even if the house was sold to new owners. To successfully repossess the property, the previous homeowner must pay the entire price the home sold for plus interest and fees in one lump sum.
As you can imagine, not very many people can come up with a few hundred thousand dollars in a short amount of time. That's why most people who buy foreclosed homes can safely move into their new homes without worrying about the old owners demanding return of the keys.
If you're in the small percentage of new homeowners that are facing this possibility or have reason to believe the old owners may attempt to reclaim the property, here are a couple of things you can do to fight back.
Check the Statue of Limitations
Every state that allows foreclosed homeowners to reclaim their properties limits the window of opportunity for statutory right of redemption. Each state is different with some limits as short as 10 days and others as long as 3 years. For example, people only have 1 year after a foreclosure sale to buy back the properties in Alabama but up to 3 years to do so in Massachusetts.
The amount of allowable time, and whether the redemption option is available, also sometimes depends on the type of foreclosure that occurred. In Idaho, for instance, a person cannot reclaim the property after a non-judicial foreclosure but can purchase the property back within 6 to 12 months after a judicial foreclosure.
Check with the laws in your area. If the statute of limitations has passed or the person's foreclosure doesn't meet the minimum qualifications, then you can simply have an attorney send the person notice that their right to reclaim the property is no longer available.
Negotiate with the Claimant
If the person is still within their legal rights to take back the property and you're set on keeping it, the other option is to try and negotiate a deal with the previous owner. Sometimes people will attempt to get the home back for sentimental reasons, but the majority of the time it will be monetary reason driving their actions.
For instance, the person may have built up quite a bit of equity in the home that they lost when it went into foreclosure. The individual may be trying to buy the home back so he or she can recoup that money.
Sitting down with a mediator is a good way to determine what the other person really wants and to figure out a solution that's fair to both of you. If the person is trying to capture lost equity, for example, you could offer to pay the individual some or all the value in exchange for stopping the reclamation proceedings.
There may be other ways you can stop a previous owner from taking back the home. It's best to consult with a real estate attorney who can work with you to find the best solution that helps you achieve the outcome you want. You can also click here for more info on real estate law.