Expert: Jay Denit - 10/3/2007

Question
I know every state has different statutes on real estate law, but I am kind of confused on an issue.  I live in Alabama and I was wondering if in a right of redemption state, does the right apply to pre-foreclosure situations?  

I understand that once a property is in foreclosure the owner has 12 months to redeem the property.  And I know the right of redemption is to protect the consumer... it's just scarey for the investor.  Especially a first time investor as myself.  

Say for instance the current home owner is behind a few months on their mortgage and the bank is considering foreclosure but hasn't done anything other than past due notices and memos of possible foreclosure.  Because I have knowledge of the possible foreclosure, for whatever reason, and the owner sells me the house, do they have this right although it's not formally foreclosed?  Or is a property in foreclosure status once notice of possible foreclosure has been sent to the delinquent owner?

Thanks,

Christian

Answer
Hi Christian,
I do remember from back in my REO days that Alabama's foreclosure laws are exceedingly different from any other state.

In your scenario, if you payoff the homeowner and it is enough to pay off his mortgages, late fees etc. then all redemption rights of the lender and homeowner will expire.  The defaulted loan will be paid in full, so in essence there is nothing to foreclose anymore.

So, I think what your asking me is that if you pay enough for the mortgages etc. does the homeowner have a right 12 months from now to come back and lay claim to the home and the answer is no.  That said, make sure you get a warranty deed and title insurance if you decide to buy the home from him.

Hope that helps!  Best of luck!