Rights of Redemption AFTER Foreclosure on RENTAL USE property
Michael MorrongielloPro Member
Specialist · Napa, CA · Member since 2015 · 123 posts · 31 votesRights of Redemption AFTER Foreclosure on RENTAL USE property
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JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
1yI'd like to correct some statements in @Fernando Alonso post. Tax sale redemption rights can be far longer than 3 years. The interest rate after a lender foreclosure has been 7.5% for many years now. Payment for improvements is based on the value those improvements added to the property, not the cost of the improvements. Valuation does not require an appraiser, but that is the recommended best method. Redemption is not uncommon with investment properties because the borrower can often sell their right of redemption to another investor, who then has the right to exercise it. In fact, redemption is probably more common with investment properties than with owner occupied residential properties, but that is just based on anecdotal evidence, not actual numbers. As far as coming up with enough money to stop the auction, once the loan has been accelerated in Alabama, only payment in full will stop the auction, or a voluntary agreement by the lender to pause while a short sale or something similar is negotiated. I doubt a waiver of post foreclosure redemption rights would be enforceable, because they do not even come into existence until after the foreclosure, so there is nothing to waive at the time the mortgage is executed.
3 Replies
- 1yFernando AlonsoPro MemberInvestor · Miami, FL · Member since 2025 · 33 posts · 29 votes
Hi Michael,
Alabama has a unique feature when it comes to foreclosures — the statutory Right of Redemption, which can last up to 1 year after a mortgage foreclosure or 3 years in the case of a tax deed sale.
Now, here's the twist: even if the property was owned by an LLC and used as a rental investment, the right of redemption still applies, unless the entity expressly waived it in the loan documents (which is rare but worth checking).
To redeem, the former owner (in this case, the LLC) would have to:
-Pay the full foreclosure sale price
-Add 12% annual interest (at least as of 2024)
-Reimburse for any permanent improvements made
That last part is tricky, improvements must be professionally appraised, and it’s often a complex, costly process for the redeeming party.
Also interesting: property taxes paid by the purchaser during the redemption window are not reimbursed, as they're considered a benefit the interim owner received from the municipality.
Now, practically speaking? Redemption is rare in investment properties. If the prior owner couldn’t come up with enough to stop the auction (sometimes even 40–50% of the debt), it's highly unlikely they’ll have the liquidity to buy it back later, cash plus interest and improvements.
But there is a downside: Until the redemption period expires, the title is clouded — which means:
-You may not get title insurance
-Reselling it with a marketable title is tough
-Using it as collateral for financing could be limited
Hope it helps! - Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Michael Morrongiello:
Question;
If we purchase a DOT - Deed of Trust & Note on a RESIDENTIAL property in Alabama where the Borrower is or was 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?
check with an attorney on timelines and ways around it. We use Rubin Lublin a lot for our alabama foreclosures and they could provide assistance.
7e investments53 Reviews - JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes1y
I'd like to correct some statements in @Fernando Alonso post. Tax sale redemption rights can be far longer than 3 years. The interest rate after a lender foreclosure has been 7.5% for many years now. Payment for improvements is based on the value those improvements added to the property, not the cost of the improvements. Valuation does not require an appraiser, but that is the recommended best method. Redemption is not uncommon with investment properties because the borrower can often sell their right of redemption to another investor, who then has the right to exercise it. In fact, redemption is probably more common with investment properties than with owner occupied residential properties, but that is just based on anecdotal evidence, not actual numbers. As far as coming up with enough money to stop the auction, once the loan has been accelerated in Alabama, only payment in full will stop the auction, or a voluntary agreement by the lender to pause while a short sale or something similar is negotiated. I doubt a waiver of post foreclosure redemption rights would be enforceable, because they do not even come into existence until after the foreclosure, so there is nothing to waive at the time the mortgage is executed.
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