Real Estate Investor · Chelsea, AL · Member since 2013 · 32 posts · 4 votes
I have a private lender in the State of Alabama that has foreclosed on a property and wants to sell to me. There are 8 months still left on the right of redemption and legal concerns regarding the current occupant who happens to be the former owner of the home. Do any of my Birmingham investors have advice as to how to legally work around/with this issue besides waiting 8 months?
If you can't get them out of the house, you will have to do an ejectment lawsuit. This can be very time consuming and costly, probably the reason why the lender wants to sell.
If you can't get them out of the house, you will have to do an ejectment lawsuit. This can be very time consuming and costly, probably the reason why the lender wants to sell.
It sounds like to me the lender is trying to avoid having to go through the eject process. My understanding is that once the party is served with an ejectment they have 10 days to vacant property if they want the right to redemption. If they don't vacate then they waive the right to redemption. I don't practice law anymore and I've never practiced real estate on a big scale. However, I did a lot of bankruptcy so I would review foreclosure and ejectment motions. Ask the lender for any documents they may have on notice to the owners of the property. Then I would take them to a real estate attorney for them to review. A review of the documents should not cost that much. Good luck!
Thank you all for your contribution. I did check with an Alabama RE attorney and was told that a waiver could be done quite easily. In this case the lender/seller stalled on the deal after wanting to include two other properties that I wasn't too fond of. Good to know for future reference though.
So basically, the owner signs a redemption of rights waiver? And my understanding of that is that they (the owner) is stating that they will not in any form or fashion try to redeem the property and the waiver is viable in any court? Am I on the right track?
@Account ClosedYes, that is how I understand it also. However, just because the previous owner signs over a right of redemption does not mean other parties do not have the ability to redeem (ie. junior lien holders, etc.). However, if does prevent the owner from selling their redemptive rights to another party. Although this is is underhanded and frowned upon practice, there are investors who try to buy redemptive rights from previous owners. Redemption rights can be assignable. Fact of the matter is that redemption is something that is rarely done as it relates to mortgage foreclosure. The owner has to reimburse to you what the property sold for at the courthouse steps + reimbursable carrying costs + reimbursable improvements (everyone has their own opinions on this) + interest. Reality is, most owners who have been foreclosed upon either (a) lost the property and will have a hard time coming up with the money to redeem or (b) were so underwater they do not want to redeem. If YOU directly purchase it at auction, chances are they were not "underwater" on their first mortgage but has junior liens that prevented them from shortselling (ie. second mortgage, income tax liens). If they were underwater, the bank most likely bought the property back and sold as an REO for a loss. In that case, there is virtually no reason anyone would want to redeem since they would be paying more than market value to redeem the property. I probably provided more information that needed here, but thought I would share.
Be sure to read up on what is considered a "reimbursable" improvement. There have been investors who have been burned on this in the past. It is such a subjective topic that I am not sure if it will ever be nailed down completely.