Foreclosure in Alabama: The Right of Redemption
As foreclosures have been a concern for many in this economic climate, it is important to know Alabama law provides significant protection for foreclosed homeowners through the right of redemption. Redemption is a personal right created by statute that allows former homeowners, junior lien holders, spouses and children of former homeowners, and others with an interest in a property, to reclaim their interest for one year after the date of the foreclosure sale
Click the link for a copy of those allowed to redeem under Alabama law: http://law.justia.com/alabama/codes/3069/6-5-248.html
The right of redemption expires after one year. Generally, the price paid by the redeeming party is the price of the property bid at the foreclosure plus those other charges allowed by statute. The redeeming party may also have to pay interest at a rate of 12% on those amounts paid by the current owner of the property towards the upkeep and maintenance of the property.
A listing of the allowable charges is shown here: http://law.justia.com/alabama/codes/3069/6-5-253.html
A right of redemption is generally not created when the sale of the property is to a third party by the party who purchased at a foreclosure sale. If you do purchase a property that has been foreclosed in the past year, it is important that a title commitment is reviewed prior to purchasing the property. Redemptions are uncommon but do occur. Often, the redeeming party has been able to obtain the money required to purchase the property through alternative forms of financing (borrowing from family, winning the lottery, etc.).
A good rule of thumb is to purchase a foreclosed property at a price less than what it sold for at a foreclosure sale. While this may seem elementary, many don't check the foreclosure sale price prior to purchase.
Among the reasons for doing so are:
1. Foreclosed properties are often in a poor state and in need of repairs
2. If your purchase price is more than the price bid at the foreclosure sale, you may be required to purchase a redemption bond, adding a significant amount to your settlement costs at closing. This is because a redemption bond is intended to protect the new homeowner in the event the purchaser is reimbursed by the redeeming party by an amount less than what he paid;
3. If an authorized party wishes to exercise their right to foreclosure, you want to make sure you get a good return on your investment.
If you are a former homeowner that has been foreclosed on, remember these rules:
1. Take pictures of every part of the property prior to leaving. This will enable you to rebut any additional costs claimed for permanent improvements to the property
2. Get out within 10 days of receiving written demand for possession by the foreclosing party. This is usually standard operating procedure for foreclosures. Failure to comply results in a forfeiture of your right of redemption.
Remember, if your property is being foreclosed, you have rights. Contact an attorney for a short consultation to see if the process is being handled in accordance with Alabama law.