Can the Previous Owner buy back the house?

Question

I purchased a foreclosed house from the court house steps and now the previous owner want to repurchase it from me. He originally owed the bank $80,000 and I have agreed to sale the house back to him from $35,000. He has came up with $20,000 and says he can raise the other $15,000 in a month or two.

I was wondering if he can legally buy the house from me since he was foreclosed upon?

Christopher Phillips · Answer

@Jason Genovese

A buyer can buy back their home after a foreclosure in Missouri within a certain time frame if the lender is the purchaser. It's called right of redemption. They usually must pay the full auction sales price, interest, and legal fees. And they must announce ahead of time that they plan to do it, post a bond, and they have one year to do so. If it's a third party, they don't have right of redemption. Most foreclosures in Missouri are non-judicial. So, how it was done can also change things. Speak with your lawyer about it.

Rich Baer · Answer

@Russell Brazil@Jason Genovese

Thanks for the prompt Russell. I have run into this situation many times. The way it works is that the foreclosed owner can not take title to the property in his own name. The reason is that the mortgage and any liens would reattach. The Buyer needs to take title in a different entity or have a family member put it in their name.

Russell Brazil · Answer

I can not think of anything that would prevent this, but my spidey sense is tingling a little bit on this one.  Talk to a title attorney to see if they have run into this issue. @Rich Baer is one and may have some insight.

Wayne Brooks · Answer

No law against it.

Don Wede · Answer

It all depends on the state. Some do and some do not.  In most states, it is called the redemption period or having the right of redemption.  In Illinois there is no redemption period after the sale.  However the defendant has 30 days to appeal the case if they wish.

Chris Low · Answer

I agree with @Kim Tucker that, on a short sale, there is a clause that prevents the buyer from selling or even renting back to the previous owner. We just signed docs on a short sale through Bank of America and it spells this out. But with a house that's gone to auction, I don't know that the same applies and have a feeling it could vary by state. I'd talk to a real estate attorney. Seems like it would work, but you want to know for sure.

Kim Tucker · Answer

If you buy the house as a short sale, there is usually a clause that says the seller can't make any profit and you can't sell the house back to them.

If a house is sold on the courthouse step through a foreclosure auction, in Kansas they will have a 3 month to 1 year right of redemption where they could buy it back from the bank - but that would usually involve paying off the loan they had and all late fees and attorney fees.

Once you buy it on the courthouse steps through a foreclosure auction and once the deed has been transferred, you own it, all liens have been wiped out except real estate taxes.  You can sell it to anyone you want to - And if you are good with $35,000 and the seller has $20,000 to put down and you might be seller financing it to him for the rest - the only thing you have to satisfy is Dodd Frank Rules - if the previous owner was an investor and this is a rental house, then Dodd Frank is out the window.

I was the lender on a 2nd lien that was in default.  I foreclosed on the house.  The homeowner wanted to stay and is buying from me on a contract for deed, that requires him to pay my loan, his first mortgage that did was still in place, all real estate taxes and insurance (which are escrowed by the first mortgage) and so far, after 2 years, so good, he is still paying like clockwork.

Mike Cumbie · Answer

@Jason Genovese,

Disclaimer: Not legal advice in any manner.

Sounds good to me.

Can the Previous Owner buy back the house?

Most Popular Reply