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FAQ: What is Redemption Period after Sale

FAQS FOR HOMEOWNERS AND HOUSING COUNSELORS:

WHAT ARE MY RIGHTS DURING THE REDEMPTION PERIOD?


What is the redemption period?


After a property is sold at a sheriff’s sale (foreclosure sale), there is a period of
time after the sale referred to as the “redemption period” during which you still
have rights. For most properties it is a six month period. If you use the property
for agricultural purposes and filed the necessary documents with the Internal
Revenue Service (IRS), you can request that your redemption period be
increased to one year. If you have paid off more than two-thirds of the loan
amount, the redemption period can be increased to one year. If the property has
been declared abandoned, the redemption period can be substantially shortened
to as little as one month.
As of January 10, 2014, f your property is deemed in need of repairs or in
“imminent” need of repairs, your redemption period can be eliminated.
What happens during the redemption period?
During the redemption period you still have rights to the property. You can
continue to live in the property and are not required to make any mortgage
payments. You also have the right to sell the property to another person or buy
back the property and keep it.
If I want to buy back the property, what is the purchase price?
At the sheriff’s sale, the buyer paid a certain amount of money to purchase the
property. Often the buyer will be your mortgage company although it could also
be another third party. The amount necessary for you to buy back, or redeem,
your property is the amount the purchaser paid, plus some allowable costs and a
daily interest rate based upon your mortgage loan interest rate. You can learn
the sale price for your property by purchasing a copy of the sheriff’s deed from
the Register of Deeds in the county where the property is located.


What if the purchase price at the sheriff’s sale is less than the amount of
my loan?


It is possible that the sheriff’s sale buyer, even if it was your mortgage company,
paid less than the amount due on your loan. If you want to redeem, or buy back,
your property you do not have to pay the whole loan amount; you only have to
pay the purchase price from the sheriff’s sale plus interest and some costs even
if it is substantially less than your loan amount.
2
Regardless of whether you redeem the property or not, if the purchase price from
the sheriff’s sale is less than the amount owing on your loan then you may be
responsible for the difference, called a deficiency. The amount of the deficiency
is set by the sheriff’s sale purchase price, not what the purchaser sells it for later.
The mortgage company (or another company to whom they sell the debt) can try
to collect on this deficiency. If a company attempts to collect the deficiency, you
should see legal counsel regarding your rights and obligations.


I use my property for farming; is there anything I need to do to get the one
year redemption period?

Yes. Before the sheriff’s sale you must provide a copy of your Schedule F to
your previous year’s federal tax return to the mortgage company’s attorneys and
file an affidavit with the register of deeds in your county indicating you have
provided this document. After the sheriff’s sale, you can try to provide the
Schedule F but you may have to file a court action during the first six months of
your redemption period to get the full one year redemption period.


Do I have to allow the bank or the purchaser at the sheriff’s sale to inspect
my property during the redemption period?


Yes. Effective January 10, 2014, the purchaser at the sheriff’s sale (which is
nearly always the bank or mortgage company), has the right to inspect the inside
and outside of your house and all other structures (such as a garage). If you
“unreasonably refuse” the inspection, the purchaser can ask a court to cut off
your redemption period and evict you earlier. Also, if your home is in need of
repairs or in “imminent” need of repairs, the purchaser can ask a court to cut off
your redemption period and evict you earlier. If you make the necessary repairs,
you may be able to stay for the full redemption period.


What if I don’t buy back the property and I’m still there at the end of the
redemption period?


If you do not buy back the property or sell the property to someone else, then the
sheriff’s sale purchaser can file a court action to evict you from the property.
They may also offer you “cash for keys,” which is where they pay you a small
amount of cash if you agree to move out of the property by a specific date and
leave the property in an acceptable condition. If you are a tenant, you have
additional rights under federal law.
The purchaser should not simply change the locks or evict you without a court
order. If this happens you should contact an attorney immediately for assistance.

Prepared by:
Legal Aid of Western Michigan
www.legalaidwestmich.org
November 2013