Getting Down to Fundamentals II

Posted in: Real Estate in insuranceclub's Blog

Redemption Periods

One of the most popular questions deals with redemption periods. When a state has a redemption period, how are investors handling it when the property is subject-to?
It’s pretty simple actually. You need to keep it in simplistic terms. When the property is subject-to and has not been sold, you cannot take over the loan. If you go into the redemption period, you must cash the property out-you will not be able to take over the loan. This is a common mistake many people make on a regular basis.

Now this may be hard to understand, but it’s pretty simple. Think of it this way. If the foreclosure has already happened, then the hammer has already fallen. You are not going to be able to get the deed and take over the loan. What does this mean for you? Basically what I am saying is that you will be in a cash deal. If you take it to subject-to, then you have no choice but to bring it current.
I know, I know. This may seem confusing but after this point there is not a redemption period because it is not in foreclosure anymore. You got it out of there-so you are not entitled to the redemption period.

And remember, you will not be able to take it subject-to after the foreclosure-it is going to have to be pre-foreclosure. Of course, you can take it subject-to, but you would have to pay that bank off ASAP. If you don’t pay off that loan right away you won’t be able to clear the title after the sale. Most people think they can get out of this by bringing the loan current.
Is this possible?

Wrong. Very wrong. The loan does not exist after the sale. Many people don’t think in those terms. Remember-if you don’t sell it and you have a promise to make the payments (and you’ve covered yourself in your CYA Letter) and for whatever reason the deal falls through, the other guy has to deal with a foreclosure, and you are out of the game. You don’t have to deal with it. Keep in mind; if you get too close to the foreclosure sale, a bank does not have to take payments. Again, it would be in your best interest to check with state laws to see what applies for you.

…continued in Part 3

By: Bryan Benson