New Mexico Right of Redemption

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New Mexico Right of Redemption

Nick Paul
Investor · Alamogordo, NM · Member since 2012 · 38 posts · 15 votes

I'm trying to find someone with knowledge about the Right of Redemption in a judicial foreclosure state (I live in New Mexico). I would like to better understand the process of buying the right of redemption. I've had several foreclosure deals lately that were expected to come to market but an investor purchased the right of redemption and subsequently was able to secure owning the house before the property was listed on the open market as a foreclosure sale. I'd appreciate anyone with knowledge on this process allowing me to ask questions.

Thanks! 

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David Torres
Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
10y

@Nick Paul great question and I am glad you posted it!  I have purchased several redemption rights deals.  They can be pretty sticky in NM, but also profitable.

Here is the quick and dirty rundown of how it goes in NM:

  1. Seller gets foreclosed on gets a notice of lis pendens
  2. House gets sold at auction (usually on the county courthouse steps)
  3. Special Master Submits Report
  4. Judge approves sale (this is when the clock starts for the redemption period)
  5. Property owner has the right to redeem the property for 30 days (or assign their rights)

There are a ton of nuances and ways to get burned (I.E. Owner selling redemption rights to 2 people OR shady operators forging docs).  Luckily, my wife is an Attorney and has helped me work through a lot of the major problems.

Feel free to reach out and I can give you some more clarification.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    should be something you can ask a top flight RE broker about.

    In Oreygone we buy redemption rights buy simply paying the homeowner PRIOR to the sherrifs sale an amount of money to deed the house to us... many times its a nomial amount 500 to 5k.  with the idea that we bid at the sale.. and wipe out the junior lenders.

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  • Lydia S.
    Real Estate Agent · Albuquerque, NM · Member since 2015 · 542 posts · 193 votes
    10y

    This is a topic that I know very little about.  So you're saying that it is less costly to just bid at the sale than to actually stop the foreclosure by paying off the mortgage and/or taxes due?  If you hold the deed on this house being foreclosed, doesn't it become a foreclosure on your record?

    0Reply
  • Paul Falardeau
    Rio Rancho, NM · Member since 2016 · 12 posts · 2 votes
    10y

    Very interesting topic.  I hope more folks can shed some light on how it works. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Lydia S.  depends on how many liens or mortgages are on the house.. Generally its the first mortgage going to sale and if it does the junior liens are removed from title.. the juniors can still sue the owner ( though rarely do in practice)   nope credit is only affected by the person who signed the loan docs ( did you sign the loan docs when someone deeded the house to you ? ) of course you did not... so no your credit is not affected..

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  • Boyd McClean
    Investor · Adkins, TX · Member since 2012 · 193 posts · 93 votes
    10y

    @Nick Paul  Is your question in reference to lender or tax foreclosure?

    0Reply
  • Nick Paul
    OP
    Investor · Alamogordo, NM · Member since 2012 · 38 posts · 15 votes
    10y

    @Jay Hinrichs I've tried finding a broker here locally that has experience with this, however, I've yet to find anyone that is knowledgeable on the subject. 

    You mention that you make an offer to purchase redemption rights prior to the sheriff sale. Is there any ability to purchase the redemption rights post sheriff sale? Also, if there is no equity in the property based on the current loan value, do you ever pursue buying the right of redemption? I would assume not, however, the reason I ask is because a local agent that lists VA foreclosure in my market had a property that she was notified by the VA that she'd be listing. Come to find out, an investor was able to step in and purchase the property prior to that happening. I was assuming the investor bought the right of redemption and simply waited until the last couple days before the redemption period expired. But that would be post sheriff sale. Would I be correct in that assumption?

    0Reply
  • Nick Paul
    OP
    Investor · Alamogordo, NM · Member since 2012 · 38 posts · 15 votes
    10y

    @Boyd McClean It's in reference to a lender foreclosure.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Nick Paul  in our state the person who has the rights of redempntion is the person on title at the time of the foreclosure... so a deed to the property pre foreclosure secures your rights.

    Post foreclosure only the person who was on title at the time of the sale has the right to redeem.

    So it could be that this person had the redempntion rights and redeemed prior to the listing.

    properties with no equity are not redempntion candidates at least in our market

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  • Rick Davis
    Albuquerque / Los Lunas, NM · Member since 2014 · 19 posts · 5 votes
    10y

    @Nick Paul - you might try Mark Rickert and Dave Torres. They are both in the Albuquerque / Rio Rancho area and are pretty knowledgeable. They are both on this site as well. 

    As I understand it, in New Mexico the person being foreclosed on has a period of time to redeem the property by paying off the loan balance. They can sell this right of redemption to a third party so that the third party can pay off the loan and take possession of the property even if it has been sold at auction, as long as the property is within the redemption period. 

    I believe, but I am not certain, that the mortgage holder can sell the right of redemption at any point before the right expires.

    0Reply
  • David Torres
    Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
    10y

    @Nick Paul great question and I am glad you posted it!  I have purchased several redemption rights deals.  They can be pretty sticky in NM, but also profitable.

    Here is the quick and dirty rundown of how it goes in NM:

    1. Seller gets foreclosed on gets a notice of lis pendens
    2. House gets sold at auction (usually on the county courthouse steps)
    3. Special Master Submits Report
    4. Judge approves sale (this is when the clock starts for the redemption period)
    5. Property owner has the right to redeem the property for 30 days (or assign their rights)

    There are a ton of nuances and ways to get burned (I.E. Owner selling redemption rights to 2 people OR shady operators forging docs).  Luckily, my wife is an Attorney and has helped me work through a lot of the major problems.

    Feel free to reach out and I can give you some more clarification.

    7Reply
  • Leland Titus
    Flipper · Santa Fe, NM · Member since 2015 · 60 posts · 16 votes
    10y

    @Nick Paul

    I've done a few deals this way and currently own some redemption rights here in Santa Fe. The determining factor of whether the property is a deal or not comes down to what the bank pays for the property at auction. This is the amount that the person being foreclosed on has the right to redeem for. You can purchase these rights from them and redeem the property yourself. you then negate the banks ownership and the home is yours.

    3Reply
  • Nick Paul
    OP
    Investor · Alamogordo, NM · Member since 2012 · 38 posts · 15 votes
    10y

    @David Torres Thanks for the information! I'd like to pick your brain some more about the details of how all this works. Let me know the best way to reach out with some questions I have.

    0Reply
  • Nick Paul
    OP
    Investor · Alamogordo, NM · Member since 2012 · 38 posts · 15 votes
    10y

    @Leland Titus I take it the bank/lender is paying what the outstanding loan balance is plus any interest and attorney fees etc. at the auction? That said, this strategy works only when a property that is being foreclosed upon has equity? Do you just track the public notices about foreclosure auctions and then determine whether a property is worth pursuing or not based upon there being any equity? Thanks for your insight, it's much appreciated!

    1Reply
  • David Torres
    Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
    10y

    @Nick Paul I sent you a PM.

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  • Cameron Kloster
    Real Estate Professional · Rio Rancho, NM · Member since 2015 · 44 posts · 4 votes
    10y
    Correct me if I'm wrong but most foreclosures don't have equity right ? The only way that a redemption right deal works is if the lender sells the property at below market value at auction ? At what point in the foreclosure process do you buy the rights ?
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @David Torres  redemption rights are tricky as you allude to.. in our state where Sheriffs sales en masse like what happened a few years ago we had no case law on most of it. as Sheriffs sales for owner occ homes was rare as hen teeth.. the law was always there but sheriffs sales were usually for intestate situations for commercial deals.

    One issue with redeeming.. at least in our state.. is what happens with junior liens.. in our state if you do redeem the juniors pop back up and attach again.. so its a pretty complicated process.  The other issue is what happens when the bank does a drop bid.. does the amount to redeem equal the drop bid or can the bank then go back to what's actually owed.. there was fights in the courts going on about that issue.

    however I think its safe to say if you have a clean deal with only the first loan on the property it has equity.. then those are rights to go after.

    In our market you secure the rights by simply having the owner of record either before or after sale pre sunset of redemption rights .. give you a Deed to the property transferring title. I suspect bargain and sale deed .. once your on title you have the rights to redeem.  that's about how it works here.

    So you have as you stated groups of folks that do nothing but run around talking folks into deeding them the homes pre foreclosure generally .. then show up at the sale.. some newb buys it not really understanding the redemption rights issues.   once they hand over their cashiers check for the full purchase price.. they approach the bidder and now proceed to educate the person who bought it how redemption rights work. and try to make a profit between what they paid which can be as little as 100 dollars and what the person who just bought the house is willing to pay not to have to wait 6 months.. some squirrely dudes do this as you can imagine... there is a play here in our state if you have patient money to just wait out the redemption rights. you can evict the owner post sale legally. but anything you put into the home above and beyond money to secure it and keep in it shape would not be given back to you if a redemption took place. IE you rehab the house for a retail sale and someone redeems your SOL for all those rehab costs.

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  • David Torres
    Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
    10y

    I know of a couple of horror stories where some unsuspecting citizen purchases a property at the sale, fixes it up, and then someone comes in and redeems the property.  There is nothing they can do about it.

    The opposite happened on one of the deals I am working on, we redeemed a house, and while we were waiting for the deed, the bank came in and cleaned all the trash out of the house and secured it.  It was probably two 40 Yard dumpsters worth.

    The junior liens can be tricky.  If they were named in the foreclosure, they get wiped out.  Some liens can't get dismissed.  Talk to your favorite local attorney and title company before you redeem a property.

    0Reply
  • Sergio Castillo
    Santa Fe, NM · Member since 2017 · 23 posts · 1 vote
    7y

    @David Torres I have some questions about the rights of redemption process in New Mexico. Do you mind if I pick your brain as well?

    0Reply
  • David Torres
    Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
    7y

    Give me a call srrgio

    0Reply
  • Corban Kurz
    Rental Property Investor · Albuquerque · Member since 2019 · 18 posts · 7 votes
    7y

    Great question(s) and info here guys. I was just following along to learn as well :)

    0Reply
  • Scott Hotchkiss
    Rental Property Investor · Tucson, AZ · Member since 2019 · 13 posts · 2 votes
    7y

    I’m in Arizona and I’m wondering if the holder of right of redemption pays the auction winner off or the bank?

    0Reply
  • David Torres
    Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
    7y

    @Scott Hotchkiss I don't think AZ has a ROR.  

    There are a bunch of different methods, but you have a couple of options:

    1. If someone buys it at auction - 
      1. You can redeem judicially.  have an attorney draft up a petition for redemption, deposit the money with the court, and wait to get a certificate of redemption
      2. You can payoff the person that bought it at auction and do a QCD.
    2. If no one buys it at auction, you can either 
      1. Ask the banks attorney for a redemption quote.  Deposit the money in the Attorneys trust account then wait for a deed
      2. Redeem Judicially

    There are pluses and minuses to each.  Redemptions are a very risky game.  You need to be fully aware of what you are doing, because there are hundreds of nuances.  If you get in to the game, make sure you have an attorney who is experienced in this arena.  They can save you a lot of time, money, and heart ache.  Reach out if you want a contact for a local NM attorney that helps me with mine.

    1Reply
  • David Lynn
    Member since 2019 · 1 post · 0 votes
    7y

    I have a question about the individual who deeds the house to someone who purchases the redemption rights. The case in point is in regards to someone who was Willed a property, but was unable to pay a reverse mortgage off. As a result the property has gone into foreclosure. An investor has approached the individual about purchasing redemption rights to the property. My question, is the money that is paid for redemption rights to the property considered an asset to the estate of an individual who has passed away? 

    0Reply
  • David Torres
    Full Time Investor · Albuquerque, NM · Member since 2013 · 320 posts · 154 votes
    7y
    Originally posted by @David Lynn:

    I have a question about the individual who deeds the house to someone who purchases the redemption rights. The case in point is in regards to someone who was Willed a property, but was unable to pay a reverse mortgage off. As a result the property has gone into foreclosure. An investor has approached the individual about purchasing redemption rights to the property. My question, is the money that is paid for redemption rights to the property considered an asset to the estate of an individual who has passed away? 

     David - why do you ask the question?  This is one for an attorney.

    1Reply
  • Neil Lambert
    Wholesaler · Member since 2019 · 1 post · 0 votes
    6y

    I thought I might add some information to this thread. It might be helpful to others.

    I find myself in the position of wanting to purchase redemption rights. Here is some information that has been provided to me.

    Steps in the redemption process:

    1. Redemption period ends on DATE
    2. Need an Assignment of Rights of Redemption
      a. Assignors: former owner(s)
      b. Assignees: to whom the rights are being assigned
      c. Assignees agree to pay Assignors the sum of $_______
      d. Assignors shall fully cooperate with Assignee in the execution and delivery of such and further documents
      e. Assignors sign in front of Notary, record in Bernalillo County and get copy to Assignees or Assignee’s attorney
    3. Assignees or their attorney foreclosure attorney to get pay-off amount. There is interest estimate to add.
    4. Get cashiers check to foreclosure attorney
    5. Petition for Certificate of Redemption must be filed with District 2 Court
      a. Assignment as recorded in #2 above must accompany as Exhibit A
    6. We will want to create a separate document to cover details of our side deal covering payment of Redemption Right
    7. It could take 30-45 days for new deed to be executed

    Has anybody here gone through the whole process?

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