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Can a homeowner redeem a foreclosed property?

by | Sep 9, 2021 | Real Estate Practice

You want to invest in real estate by purchasing homes that have been foreclosed upon by the bank. This is often frustrating for buyers who are looking for somewhere to live, as it tends to take time and be more complicated, but you are not worried about it. You have time, you don’t plan to live in the homes you buy, and you just want the best deal possible. 

From this perspective, homes that are under foreclosure do make sense, but you’ve heard that owners can sometimes “redeem” these homes. What does this mean for you and is it going to impact closing on a new property? 

States have their own redemption laws

If you have heard of this redemption process, it’s likely because it is used in other states. However, Pennsylvania law does not address this and will not give a homeowner a chance to redeem property after a sheriff’s sale auction on a mortgage foreclosure. If that type of auction has already happened, and the owner had proper notice of the sale, the homeowner’s rights to that property have been lost and they cannot be regained. 

That said, homeowners who are still within the foreclosure process — but before the sheriff’s sale auction — can have their rights reinstated. Just because they have fallen behind on payments doesn’t mean they lose the home for certain. If you are the high bidder at the sheriff’s sale, you have to wait for the sheriff to issue the deed and have it recorded. Until that happens, there is still a possibility the sale can be set aside by the person who lost the property, by filing a petition to set aside the sale based on defects in the process. However, if the auction has already taken place and you’re closing on the purchase of your new property with a deed from the bank which foreclosed, the time to challenge the sale process has passed and you can likely get title insurance to protect your investment. 

Certain Pennsylvania tax sales, when property is sold by the municipality, school district or county for unpaid real estate taxes, do have rights of redemption for homeowners who lose their homes for unpaid real estate taxes, but those sales occur by nine different sale processes, depending on the county and taxing districts involved and choices those taxing districts make in which available process to use. We recommend that you do not try to buy any tax sale property without good legal advice on the specific process and type of sale involved.

Avoiding pitfalls while closing

Though redemption isn’t likely a possibility, there are other pitfalls that may happen during any involuntary sale for unpaid mortgage or taxes need to know what they are, how to avoid them and what legal options you have