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Vol. III, No. 2 June 2006

The W’s of the Right of Redemption

What is the “right of redemption” and why can it be helpful to a homeowner in foreclosure?

             The right of redemption is the ability of the homeowner to pay the Lender in full prior to the completion of the foreclosure.  As we all know, if the foreclosure goes to completion, the homeowner loses the property to the Lender or the third party bidder at the foreclosure sale.  Thus, the Lender receives either payment in full (when a third party bidder wins at the sale) or the property (which the Lender will then sell it to obtain the return of the money it lent to the homeowner).  The Lender simply wants paid.  The foreclosure process gives the Lender the mechanism to make getting paid happen.

             So, if the homeowner is somehow able to raise the money to pay the Lender in full (including interest, costs, and attorneys’ fees), he can stop the foreclosure in its tracks and escape the risk of losing his home. 

             When do you have to redeem?  A homeowner can exercise his right of redemption at any time prior to the issuance of the certificate of sale or the time for redemption set forth in the final judgment of foreclosure (if the time is different than the issuance of the certificate of sale).  The certificate of sale is issued directly after the foreclosure sale.

             Why is this important to the homeowner?  Redemption can sometimes be the last ditch effort to save a home for someone.  For what ever reason, folks in foreclosure often delay far beyond the time they could have crafted a solution that would have been cheaper and less stressful.  For example, if action is not taken soon enough, a reinstatement of the mortgage, i.e., catching up the back payments, is not practically possible.  Sometimes, a closing with a buyer can’t be done in time for various reasons because of its proximity to the foreclosure sale.  But not to worry, if you can raise the funds to redeem, you can stop the sale.

             Here is a possible scenario that will show you how a redemption could benefit a homeowner in foreclosure.  Joe Homeowner waits until the eleventh hour before he decides to sell the home to Bob Investor.  Unfortunately, the foreclosure sale is tomorrow.  Normally, most buyers can’t move this fast, but Bob is swift and motivated and decides he get make this happen before the foreclosure sale.  Bob uses the statutory redemption provisions to tender the amount owed to the foreclosing Lender and stops the foreclosure sale.  Joe gets some money from the closing and Bob gets the property. 

             Now what Joe and Bob is a very simplistic example.  Making this happen is somewhat involved and can be tricky, so I suggest you use legal counsel if you find yourself in this situation.  But it can be done and the homeowner can be saved from the jaws of foreclosure.

             Furthermore, the right of redemption can be assigned by the homeowner without the underlying property being transferred.  As long as the money is tendered to the court for the benefit of the assignee, it can be paid by a third party.  In short, there is some flexibility available as long as the right is properly assigned by the homeowner and the money is clearly tendered on behalf of the person redeeming the property.

Article inspired in part by VOSR Industries, Inc. v. Martin Properties, Inc., 919 So.2d 554 (Fla. 4th DCA 2005).     

The information provided herein is not to be considered legal or financial advice of the publisher or author.  Readers should rely on their own legal or financial counsel regarding any matters described above.  No warranties, express or implied, are provided.  The foregoing may not be reproduced in whole or in part without the express written consent of the publisher.

 

The information provided herein is not to be considered legal or financial advice of the author. Readers should rely on their own legal or financial counsel regarding any matters described above. No warranties, express or implied, are provided. The foregoing may not be reproduced in whole or in part without the express written consent of the author.

© Jeffrey A. Icardi 2000