What is Right of Redemption?
Definition Of Right of Redemption
The “right of redemption” is simply the right of the foreclosed homeowner to buy the home back from the person who bought it at foreclosure. This right of redemption is different from the common law "equity of redemption." The right of redemption exists after a foreclosure sale and the equity of redemption exists prior to the sale. The equity of redemption can exist in situations where the right of redemption doesn't exist.
Redemption after Auction
After the sale (foreclosure auction) is over, you may still have the chance to get your house back if the house is sold by judicial foreclosure. It is different from the "right of reinstatement". The right of reinstatement involves bringing your note current. The right of redemption involves paying the "redemption price." In other words, reinstatement does not require that the entire loan be paid off, but redemption does. Reinstatement protects against acceleration.
The right of redemption is purely statutory. This means that there has to be a specific law providing for the right. If there isn't a statute, there is no right.
If your house is sold under a deed of trust, the sale is done through the power of sale clause contained in the trustee’s deed. With the trustee’s sale, you lose your right to make any claim on the property and there is no right of redemption.
Furthermore, at a trustee’s sale, you do not have the right to buy your house.Judicial foreclosures are uncommon in deed of trust states, such as California, Nevada and Colorado.
This right of redemption is one reason that judicial foreclosures are so unpopular with lenders. As is discussed elsewhere, the right of redemption makes a house difficult to sell because it can't be readily sold until the redemption period expires.
Statutory Periods for Redemption
The statutory period for redemption varies by state. In California, post-sale redemption is only available for judicial foreclosures (except where there is a nonjudicial foreclosure by a homeowners association). The period for redemption is either 3 months or 12 months depending on whether the foreclosure sale proceeds are enough to pay off the secured debt. If the sale raises enough money, the redemption period is 3 months. If it doesn't, the period is 12 months.
In some states, such as California, the statutory period for redemption can be extended if you can show that the foreclosure was the result of mistake or fraud.
The Redemption Price
In order to redeem the house, the you must pay the "redemption price." This is generally the price paid by the purchaser at auction plus any taxes.