Right of redemption law (in Oregon)

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Right of redemption law (in Oregon)

Joe Liu
Beaverton, OR · Member since 2013 · 56 posts · 9 votes

Hi guys, does anyone have experience with the "right of redemption" law? So what I am wondering is if a Judicial foreclosure happens and lets say the house is worth $200k. They for whatever reason let it go to something stupid like $30k in property taxes, could I go out, seek out these x-owners with the "right of redemption" and buy the right of redemption from them and then pay off there $30k + fees and then take over the property?

Also, that 2nd part of this law - "by submitting notice to the Sheriff not more than 30 and not less than 2 days in advance of the redemption". Does this mean, redeem the right of redemption within 6 months. Once I pay off the outstanding loan, after 2 days, I have to let the sheriff know?

Also, I heard that if there is a 2nd loan on the house, that the 2nd loan has 2 months right of redemption. If anyone is from Oregon, have you heard of this?

------------- pulled this off the Oregon website ------------
Is there a right of redemption in Oregon?

Oregon has a post-salestatutory right of redemption for judicial foreclosures, which would allow a party whose property has been foreclosed to reclaim that property 180 days after the sale by making payment in full of the sum of the unpaid loan plus costs and by submitting notice to the Sheriff not more than 30 and not less than 2 days in advance of the redemption.

Thanks!

Joe

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Roger Sharp
Hillsboro, OR · Member since 2017 · 8 posts · 6 votes
9y

Chandler Cole, at a sheriff's sale held in connection with a judicial foreclosure, the sheriff does not deliver a deed to the property. The sheriff only delivers a certificate of sale. After delivery of the certificate of sale, the property owner has a statutory right to redeem the property within 180 days of the sheriff's sale by paying the price bid at the sale plus property taxes, HOA dues and expenses the certificate holder has paid to protect the property from waste, plus interest on the above at the rate of nine percent per annum. Sometimes the amount required to redeem the property is far less than the fair market value of the property. This means the right of redemption has some value. The property owner can get some of that value by selling the right of redemption to another party.

Let's remember that those property owners going through foreclosure are the human beings most likely experiencing some true misfortune in the foreclosure scenario.  Their properties, often their homes, are sold because they cannot pay their loans, often because of job loss, divorce, injury, death in the family and other events outside their control.  On the other hand, persons who bid at foreclosure sales voluntarily go to the sheriff's auction to bid because they hope to get a bargain, and they often do.  These hopeful bidders certainly have the opportunity to learn about the right of redemption before the auction, and they should.   They should not be surprised if the bargain they hoped to obtain is taken away by exercise of a  right of redemption.

The short answer to your question is that the high bidder at the sheriff's sale from a judicial foreclosure has not bought the property.  He or she has only purchased a conditional right to own the property after 180 days in the future if it is not redeemed.  The property owner can sell his or her right to redeem to someone else.  

Property owners need to take care that they do not sell too cheaply.  I have seen terrible examples of unethical behavior related to the purchase of rights of redemption for far less than was fair.    

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  • Roger Sharp
    Hillsboro, OR · Member since 2017 · 8 posts · 6 votes
    9y

    John Kevin Hunt,

    Nothing is as simple as the two choices you presented.  

    When the property was sold the sheriff collected the money and paid it to the court.  The court distributes the money owed to the foreclosing lender and then holds the surplus funds.  If there are junior lien holders, the junior lien holders can apply to the court for distribution of amounts due them from the surplus funds.  The foreclosed homeowner can apply to the court for distribution of surplus funds which need not be paid to the junior lien holders.  

    After acquiring the right of redemption, your associate of homeowner (AH) must still go through the statutory process to redeem the property.  This requires delivery of a notice of redemption to the sheriff, with copies served on the person who purchased at the sheriff's sale.  To redeem AH will need to pay the full $220k to the sheriff, together with interest, etc.  The sheriff will process the check and eventually issue a certificate of redemption.  The sheriff will pay the $220k plus to the person who purchased at the sheriff's sale.

    Of course, AH can also negotiate with the person who purchased the property at the sheriff's sale.   To force the redemption, however, AH will need to follow the statutes set forth on ORS 18.960 to ORS 18.985.  

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  • Chandler Cole
    Real Estate Investor · Portland, OR · Member since 2017 · 2 posts · 0 votes
    9y

    can anyone other than the owner who lost property in the auction use the rights of redemption basedd on Or laws?

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  • Roger Sharp
    Hillsboro, OR · Member since 2017 · 8 posts · 6 votes
    9y

    Chandler Cole,

    The owner is the judgment debtor.  The owner can convey the owner's right of redemption to another, and that person can redeem just like the owner could have..

    Other lien holders also have the right to redeem, and these rights of redemption can also be conveyed to others.   

    These are statutory rights of redemption,  so strict compliance with the statutes is required.

    Roger Sharp

    1Reply
  • Samantha Lotti
    Realtor · Albany, OR · Member since 2014 · 128 posts · 30 votes
    9y

    great info...

    0Reply
  • Shelley Fitch
    Residential Real Estate Broker · Gresham, OR · Member since 2015 · 1 post · 0 votes
    9y

    my question is,  if an investor buys a borrower's right of redemption on their property that is delinquent in mortgage loan but has no foreclosure date yet and wants to work with bank to negotiate a "short sale" before it goes to foreclosure, do we use a standard real estate sales agreement with investor as " buyer" and borrowers still listed as "sellers"?  When legally the investor's name is now on title?

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  • Jesse Rivera
    Lender · Long Beach, CA · Member since 2013 · 496 posts · 296 votes
    9y

    My guess is you won't be able to do a short sale this way. The mortgage is in the original owner's name, and now title is in the investor's name. Banks want an "arms length" transaction in a short sale, and I think they would balk at this. Just a guess, have never tried this.

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  • Lisa Ball
    Eugene, OR · Member since 2017 · 5 posts · 0 votes
    9y

    I'm a homeowner losing my home as are another family i know. Family 1 has a sherrif sale scheduled in November. They have tenants there, who have a one year lease  (since July) which was signed before the writ of execution was recorded. She says in Oregon, a foreclosure wherein tenants occupy with leases will be allowed to stay for the term of the lease. Is this correct? If so, once the sherrif sale is held, who do they pay the rents to? Family 2 occupies the home. The process was judicial. Does sherrif sale purchaser generally allow prior owner to stay during the redemption period? and then do a 30 day notice? The timing of these things isn't clear to us.

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  • Mike GruolPro Member
    Flipper/Rehabber · Bend, OR · Member since 2015 · 45 posts · 1 vote
    8y

    Great information - thanks all for the insights.  

    Does anybody know if someone who buys redemption rights has any rights to access the property prior to exercising the redemption rights?  For instance, an investor who buys the redemption rights, but wants to see the house to assess the work and qualify the investment before putting up a lot more money to buy the property?  

    Does holding the redemption rights give that investor any claim to seeing the house, or can the party that bought the property at auction deny the holder of the redemption rights access to the property? At first I would have thought the party that bought the property at auction would clearly have that right to deny access, but after reading Roger Sharp's note that the buyer is in fact getting only a certificate of sale until the redemption period expires, this seems less straightforward to me. 

    Thanks, 

    0Reply
  • Jesse Rivera
    Lender · Long Beach, CA · Member since 2013 · 496 posts · 296 votes
    8y

    Here's my take as someone that has purchased Sheriff auction properties, with and without the rights.

    The person that purchased the property at auction has ownership rights, the person that has owns the rights of redemption, after the sale, only has the right to redeem. They don't have access to the property without the current owner's permission.

    I'm not an attorney, and don't even play one on TV,  so this is not legal advice.

    1Reply
  • Mike GruolPro Member
    Flipper/Rehabber · Bend, OR · Member since 2015 · 45 posts · 1 vote
    8y

    Good morning Jesse, 

    Thanks for your reply.  I appreciate your experienced take.  

    0Reply
  • Lee Allen
    Specialist · USA · Member since 2008 · 40 posts · 5 votes
    7y
    Originally posted by @Brian Bellairs:

    I am a Realtor working with an owner and a buyer right now. The owner wants to exercise his redemption rights then sell the house to the buyer. I can't find anyone to tell me exactly how the process works. The Sheriff's office said "hire a foreclosure attorney". Oregon statues say that bank is entitled to what they paid at auction plus 9% interest and allowable fees. How do determine what the fees  are? How does the bank get the the money?  How does the title process work? Can a buyer get a loan and purchase the property?

    Seems like there would be a clearly defined way to do this. 

    Can anyone help me?

    It may work differently in every state but if an Investor buys the property at the auction and then turns around and sells the property to a new buyer they have to get a foreclosure redemption bond (Surety bond) to cover the difference between the purchase amount and the sale amount.

    If the previous owner wants the property back during the redemption phase they initiate a lawsuit to redeem the property. The judge will decide what repairs the investor made was necessary repairs. There are some things that judges have been resistant to reimbursing the investor. I have had a judge tell me directly that he doesn't allow things like $50,000 landscaping where the investor puts in a new swimming pool and hot tub because these are not necessary repairs but are luxury items. If the investor decided to gilded the walls in gold instead of painting them then this would not be reimbursable since it is not a necessary repair. There have been cases where a master bedroom luxury suite is not reimbursable.

    If the investor bought the property for $50,000 and then did $100,000 in repairs and upgrades and sold the property to a new owner for $300,000 the original owner would have to initiate a redemption lawsuit. If the judge says that the property can be redeemed for $100,000 by the original owner because $50,000 of the investor's repairs were not necessary (ie Put in a pool) then what happens is the surety bond kicks in and pays off the new buyer's mortgage and then initiates a lawsuit against the investor to get their money back. The investor owes this money back to the surety company because he signed an indemnity letter to get the foreclosure bond.

    The new buyer will be out for things like moving expenses and custom made drapes because those were not related to the sale of the property. The new buyer knew they were buying a foreclosed property during the redemption period and this was a risk they took.

    As an investor, you should realize that the owner that lost the property basically lost everything. If you are going to make over $100,000 of profit for 4 months of work and the original owner gets nothing then this is bad karma and it is only a matter of time before it catches up with you. If you are a Christian you can think of it as a tithe and give alms to the poor.

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  • Roger Sharp
    Hillsboro, OR · Member since 2017 · 8 posts · 6 votes
    7y

    Brain Bellairs,  for any Oregon redemption you should ignore the process described by Lee Allen .  That  process may work where he is from, but that is not how it is done in Oregon.  

    There is a clearly defined process for redeeming a property sold by the sheriff.  It is described in the the applicable Oregon statutes, ORS 18.960 to ORS 18.985.  I am not an attorney, and I will not attempt to summarize here the long and detailed procedural steps and deadlines that are set forth in the statutes.   However, if you do not follow the procedures exactly within the time allowed,  you might find yourself with a worthless expired right of redemption.

    Roger Sharp

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  • Roger Sharp
    Hillsboro, OR · Member since 2017 · 8 posts · 6 votes
    7y

    Mike Gruol and Jesse Rivera, you guys posted on this a long time ago, but  I just saw your posts.  The purchaser at a sheriff's execution sale is definitely entitled to possession following the sale, subject to possible rights of a tenant during the redemption period if the tenant pays rent.  The statute that addresses this is ORS 18.946.

    The sheriff only issues a certificate of sale at the time of sale.  The sheriff's deed does not come until after all redemption periods expire.  This makes obtaining financing during the redemption period tough, but the right of possession is controlled by the referenced statute.

    Like Jesse, I am not an attorney.  I am not giving legal advice.  I have looked at this issue for a personal redemption transaction.

    Roger Sharp

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  • Tammie Delaney
    Member since 2020 · 1 post · 0 votes
    6y

    So if I purchase the house at Auction, and have only a certificate of sale - do I have the right to evict the homeowners immediately? OR do I have to wait till their redemption right is up when I receive the deed in 180 days.

    Also the house was a judicial foreclosure and the homeowners may redeem their rights and buy back for the auction price. Do they have title issues if they redeem? The mortgage did not file a deficiency since a primary home.  And their are no liens on the property. Would they have title issues to sell the property in the future?

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