The right of redemption gives a borrower the ability to reclaim property after default. Equitable redemption allows the borrower to pay off the full debt and stop the foreclosure at any point before the sale. Statutory redemption, available in some states, allows the borrower to repurchase the property for the foreclosure sale price even after the sale is complete.
States With Statutory Post-Sale Redemption
- ✦Alabama: 12-month statutory redemption period after the foreclosure sale
- ✦Iowa: 6-month period when no deficiency is claimed; 12-month period when deficiency is allowed
- ✦Minnesota: 6-month redemption period for most residential properties
- ✦Michigan: 6-month redemption period; 1 month if the property is abandoned
- ✦Illinois: 7-month redemption period from the date of the judgment of foreclosure
Impact on REO Purchases
When a buyer purchases REO from a lender in a state with a statutory redemption period, the former owner retains the legal right to buy back the property for the auction sale price during that window. Some lenders hold REO off-market or price it aggressively to reduce the chance the original borrower exercises redemption. Title insurance for REO acquired in these states includes provisions addressing the redemption period.
Investor Considerations at Courthouse Auctions
Investors bidding at foreclosure auctions in redemption states take on the risk that the property will be redeemed back from them during the statutory window. Occupancy, renovation, and resale planning must account for the redemption period before title clears completely. Some investors negotiate cash-for-keys arrangements during the redemption window to gain access and reduce uncertainty about the eventual outcome.
Aria can confirm state-level foreclosure timelines and post-sale redemption rules for any state you are working in. Ask at vicariointel.com.
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