Redemption Period On Pre-foreclosure?
I am interested in starting out doing a subject to deal. I know that one good source for motivated sellers is pre-foreclosure. How does one structure a deal if there is a long redemption period? I am in IL and there is a 9 month redemption period here. How does that affect me if I do the deal. Can they just take the house back if they come into money before the redemption period is over? Does anyone who buys using subject-to ever had a problem with this issue? Any thoughts would be helpful.
Thanks alot,
JB :-?
At least here in Michigan, once it goes to sale you cannot reinstate. That means I cannot do a sub to deal after the sale. I would have to pay off the mortgage in full. It maybe different in IL but I doubt it.
If you want to do a sub to deal than get the house under contract before the sale. Then you can reinstate and start making payments after that point.
Tom
Thanks for your reply. It was helpful!
Yes the best bet is for you to get house under contract and then put contingencies always to protect yourself of the purchase in case of any unknown repairs and so forth? but redemption period does give them some right but very doubtful they will buy it back.
Don't take my word for it but I believe you may be mistaken on the redemption period for Illinois. From what I understand Illinois' redemption period preceeds the actual sale at the acution. There is no redemption period after the sale. As I said, I'm no expert but from the few books I have flipped through this is my understanding. Hope this helps!
Now I'm confused... If someone is in pre-forclosure that means that the property still "belongs" to them. If you agree to buy sub2, and you make the payments current, then they would no longer be in forclosure.
Since they deeded the property to you for a token fee, there would be no redemption since for all intents and purposes it would be a done deal. Am I not correct in assuming the worst they could do is get the full mortgage called due immediately?
In Illinois, you can redeem the mortgage anytime before the sale. REDEEM = PAYOFF. The right to REINSTATE(bring it current and continue making payments) is only 90 days after the initial foreclosure filing. This means that after 90 days the bank has the right not to accept a reinstatement and require full payoff in satisfaction of the mortgage. That said, however, banks usually will allow you to reinstate as it is in their best interest to continue receiving monthly payments as opposed to be stuck with foreclosure case and REO house.
JB,
I think you are getting your apples confused with your oranges.
The redemption period refers to the Foreclosure…not the purchase.
Basically all you need to do when you purchase the property is make up the back payments, which stops the foreclosure; which, in turn stops the redemption period.
John (LV)
When you buy a pre-foreclosure there is no redemption period,you bought the house before the sale from the owner. If the house has already been foreclosed then the redemption period varies by state law.
I agree with compwiz,there's a statutory right of reinstatement , which is the 90 days.so, make sure the seller brings the payments up to date asap.When you buy a property sub 2 , you are buying the property subject to the morgage.which means they cannot take back that house whic is now yours.you bought it with the morgage.another thing, don't wait for the redemption period to be over, unless you want to buy a FORECLOSED proerty.
Thanks everyone for your replies. Makes much more sense now.