Help with Redemption of Rental Property in Alabama

Mobile, Alabama
Buying & Selling Real Estate
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Help with Redemption of Rental Property in Alabama

Hallie Renee Conway
Member since 2024 · 2 posts · 0 votes

We bought a rental house in Alabama that had been a foreclosure and it was still during the 1 year Right of Redemption period when we bought it. It was foreclosed for 75k, someone flipped the property and we bought it for 200k from them. A company called Asset Preservations bought the Right of Redemption from the foreclosure owner and is now trying to redeem it from us and refused to pay more than 100k during mediation and we have a trial set for July 29th. He says he doesn't have to pay us capital expenses because we didn't actually pay that, the previous owner did. According to our lawyer and case study, our base starting pay back is the 75k + taxes, interest, and insurance and not the 200k we paid so we subpoenaed the previous owner for all of his figures he spent renovating the house. Our mortgage is 150k so I am not sure what will happen if he only gives us 100k. We can't give him a clear title if we can't pay off the mortgage. We also don't have a redemption bond, our mortgage company didn't require it and we didn't even know about it honestly when we bought the property back in 2022 (we've waited this long for mediation and a trial date). Is that a fault of the mortgage company that we didn't get a redemption bond? I suppose we should have done more research but we've bought a foreclosure in the past with no problems and didn't think that would happen, and we assumed that he would have to pay us what we paid for it! My husband and I have 5 rentals, we are not super experienced and just started buying some real estate in 2019. 

He said he would appeal and appeal and appeal until he got it for 100k. Perhaps he just said that to scare us. We've looked at our title insurance and home owners insurance and umbrella policy with no help. PLEASE HELP! Does anyone have any experience with this that can help us?

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Denise Evans
JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
2y

Did they pay the $100,000 into court when they filed their lawsuit? Did they make written demand on you for the value of the post-foreclosure improvements? Short answer, redemption includes the VALUE (not the cost) of post-foreclosure improvements, no matter who made them. Copies of receipts for materials and paid bills for labor are evidence of value, but not essential. An appraiser can testify as to the before and after values, assuming you can tell him what was done.  If the redeeming party failed to pay the money into court when they filed the lawsuit, then the one year did not stop ticking down and now they can't redeem. If you failed to timely and properly respond to the demand for the value of the improvements, then you lost the right to be paid for them. This probably requires a much longer discuss that can be done on this post.

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  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 670 posts · 536 votes
    2y

    @Denise Evans can point you in the right direction.

    [email protected]
    MGM Property Pros LLC
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  • Denise Evans
    JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Did they pay the $100,000 into court when they filed their lawsuit? Did they make written demand on you for the value of the post-foreclosure improvements? Short answer, redemption includes the VALUE (not the cost) of post-foreclosure improvements, no matter who made them. Copies of receipts for materials and paid bills for labor are evidence of value, but not essential. An appraiser can testify as to the before and after values, assuming you can tell him what was done.  If the redeeming party failed to pay the money into court when they filed the lawsuit, then the one year did not stop ticking down and now they can't redeem. If you failed to timely and properly respond to the demand for the value of the improvements, then you lost the right to be paid for them. This probably requires a much longer discuss that can be done on this post.

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  • Hallie Renee Conway
    OP
    Member since 2024 · 2 posts · 0 votes
    2y

    We do have an appraisal on the property for 200k. They did make a written demand for all of our expenses on the property, which we gave them within the time allotted. There has been no exchange of money yet, we have a trial on July 29th. Do you have any case studies that might help us? Their attorney doesn't seem to think the value matters. Also don't they have to pay all the liens against the property, meaning they would have to pay off the mortgage to get the property? I would love to chat with you if you have some time. 

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  • Denise Evans
    JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    You can call me, if you want.

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  • Tish Weaster
    Commercial Real Estate Broker · Birmingham, AL · Member since 2016 · 4 posts · 4 votes
    2y

    Strongly recommend Denise Evans.  Denise has consulted on several difficult situations for me and has always provided excellent advice and service.  Well worth the consulting dollars.  

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  • Michael MorrongielloPro Member
    Specialist · Napa, CA · Member since 2015 · 123 posts · 31 votes
    1y

    Question;

    If we purchase a DOT - Deed of Trust & Note on a RESIDENTIAL property in Alabama where the Borrower is an ENTITY (an LLC) and the property is being used for RENTAL INVESTMENT PURPOSES (not as owner occupants); If it goes to FORECLOSURE and we repossess the property; Does the prior owner (the LLC Entity) still have a RIGHT OF REDEMPTION Period of time AFTER the we've completed the foreclosure and repossessed the property?

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  • Denise Evans
    JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
    1y

    Michael Morrongiello, You have a deed of trust on an Alabama property, rather than a mortgage?  If a mortgage, it makes no difference regarding ownership of an investment property, natural person or entity has the right of redemption.

    I'd have to research the technicalities of a deed of trust foreclosure. Offhand, I'd think no different from an Alabama mortgage foreclosure. In an Alabama mortgage foreclosure (unlike all other states' mortgages) title vested in the lender when the mortgage was executed. Title defeases and goes back to the borrower when the mortgage is paid in full. The foreclosure forecloses the borrower's equity of redemption (not to be confused with their post-foreclosure right of redemption), which allows the title holder (the bank) to sell the property on the courthouse steps. With a Deed of Trust, the title is transferred to the trustee when the money is borrowed. Title is transferred back to the borrower when the loan is paid in full. The foreclosure forecloses the borrower's equity of redemption, which then allows the title holder (the trustee) to sell the property on the courthouse steps. So, off hand, I'd guess no difference in post-foreclosure redemption rights if it is a mortgage or a deed of trust.

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  • Michael MorrongielloPro Member
    Specialist · Napa, CA · Member since 2015 · 123 posts · 31 votes
    1y
    Denise- Thanks for your insights; we are VERY familiar with many of the nuances you shared between a Mortgage Security Instrument and a Deed of Trust security instrument.
    The Title insurer we are seeking a Mortgagee / Loan Title insurance policy from is stating the
    Deeds of Trust are not allowed in Alabama and / or typically used and their Title Underwriter is REFUSING to insure the loan (or the issuance of a Loan Title Insurance policy)

    I find that ODD and in conflict with what the AI Post stated and I am almost certain we have bought DOT- Deeds of Trust in the past in Alabama
    0Reply
  • Denise Evans
    JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
    1y

    You might have purchased deeds of trust in Alabama, but they are very rare.  I have never encountered one.  They are not illegal.  I did not mean to be condescending or underestimate your knowledge. This is an educational forum. Other people learn from your posts and my answers.

    Clothing stores are allowed to refuse to carry clothing manufactured in China, or from synthetic materials, or a wide variety of other reasons. Title companies can refuse to insure certain instruments or methods of holding title.  It's a business decision. If something is so rare that it is not capable of evaluating the risk, then an insurer cannot set a premium. The prudent thing is to refuse to ensure it.  

    Shop for another insurer. Probably somebody will write the insurance.

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