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Right of Redemption

Also called Redemption period, Equity of redemption

In short

A right of redemption lets a foreclosed homeowner reclaim the property by paying the full amount owed, either before the foreclosure sale or, in some states, for a set period after it.

Before the sale
Available in every state
After the sale
Only in some states
Cost to redeem
Full debt or sale price, plus costs
Risk for buyers
Auction purchase can be undone

Where it fits in a foreclosure

Right of Redemption belongs to the auction stage.

  1. 1Missed paymentsThe owner falls behind; the servicer sends notices and may offer workout options.
  2. 2Pre-foreclosureA notice of default or lis pendens is filed. The owner can still sell, catch up or negotiate.
  3. 3AuctionThe property goes to a public sale, usually for cash, as-is and often without an inspection.You are here
  4. 4Bank-owned (REO)If no one outbids the lender, it takes the property back, clears most title issues and lists it.
  5. 5ResaleA buyer or investor purchases, repairs and occupies, rents or resells the home.

Two kinds of redemption

Equitable redemption lets the borrower stop a foreclosure before the sale by paying the full loan balance plus costs. It exists in every state. It differs from reinstatement, which only requires catching up on missed payments.

Statutory redemption is a right some states grant after the sale. The former owner, and sometimes junior lienholders, can buy the property back within a set period, usually by paying the sale price plus interest and allowed costs.

How it varies by state

Whether a post-sale right exists, how long it lasts and who may use it all vary widely by state and sometimes by the type of foreclosure. Periods can range from a few days to a year or more. Some states let the former owner stay in the home during the redemption period. Separately, when there is a federal tax lien, the IRS may have its own right to redeem for a period after the sale.

Why it matters to buyers

If you buy at a foreclosure auction in a state with statutory redemption, your purchase is not secure until the period ends. You may get your money back plus interest if the owner redeems, but repairs you make during that time may not be fully reimbursed. Check your state's rules or consult an attorney before bidding.

Example

Buying during a redemption period

An investor buys a home at a sheriff's sale for $140,000 in a state with a six-month statutory redemption period. Four months later, the former owner refinances with family help and pays the $140,000 plus the interest and costs allowed by statute. The investor receives that amount and loses the property, along with any time and unreimbursed costs spent preparing for a renovation.

Right of Redemption vs. Reinstatement

Right of Redemption

A right of redemption lets a foreclosed homeowner reclaim the property by paying the full amount owed, either before the foreclosure sale or, in some states, for a set period after it.

Reinstatement

Reinstatement is bringing a defaulted mortgage current by paying all past-due payments, late fees and foreclosure costs in one lump sum, which stops the foreclosure and restores the original loan.

The differenceReinstatement brings the loan current by paying only the past-due amounts and fees. Redemption requires paying off the entire debt, or the sale price after a sale.

Frequently Asked Questions

Related terms

Foreclosure AuctionForeclosure processA foreclosure auction is the public sale of a property after a borrower defaults, where the highest bidder buys it, usually with cash and as-is. If no one outbids the lender, it becomes bank-owned.Judicial ForeclosureForeclosure processA judicial foreclosure is a foreclosure that goes through the courts: the lender sues the borrower, a judge orders the sale, and the property is auctioned, often by a sheriff or court officer.Tax LienTitle & legalA tax lien is a government's legal claim against a property for unpaid taxes. Property tax liens usually take priority over mortgages and can lead to a tax lien certificate sale or tax deed sale.Deficiency JudgmentForeclosure processA deficiency judgment is a court ruling that makes a borrower personally liable for the remaining mortgage debt when a foreclosure sale brings in less than the amount owed.ForeclosureForeclosure processForeclosure is the legal process a lender uses to take back and sell a property after the borrower stops making mortgage payments, so the lender can recover what it is owed.Title SearchTitle & legalA title search is a review of public records to confirm who legally owns a property and to find any liens, judgments, easements or other claims that could affect ownership.Non-Judicial ForeclosureForeclosure processA non-judicial foreclosure is a foreclosure carried out without a lawsuit. A trustee sells the property at auction under the power-of-sale clause in the deed of trust or mortgage.LienTitle & legalA lien is a legal claim against a property that secures a debt. It must usually be paid off before the property can be sold with clear title, and the creditor can force a sale in some cases.

Learn more in the knowledge base

Researching a Foreclosure Property Before the AuctionGuide · 6 min readAt a foreclosure auction you usually buy as-is, unseen and without contingencies, so research done before the sale is your only protection. This guide covers how to confirm the sale details, check title and liens, estimate value and repairs from the outside and turn it all into a maximum bid.How Foreclosure Auctions Work: A Guide for First-Time BiddersGuide · 8 min readA foreclosure auction is the public sale where a lender's collateral is sold to repay a defaulted loan. Rules on notice, payment, title and redemption are set by state law, and buyers usually pay cash for a home they have never been inside. This guide explains how the process works so you know what you are bidding on.After You Win a Foreclosure Auction: Closing, Title and PossessionGuide · 7 min readWinning the bid starts the purchase rather than finishing it. This guide walks through paying the balance, receiving and recording a trustee's or sheriff's deed, getting title insurance after the sale, living with a redemption period, lawfully gaining possession of an occupied home and securing the property once it is yours.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.