Buying foreclosure during 6 month redemption period

5 Replies

I am purchasing a home that is off-market. We close pretty soon and I just found out that there is a foreclosure judgment on the property. The seller says the sale of the home will take care of that balance.

And I found out there is a large water bill, a $600 special assessment, 2nd mortgage on the property. All of which the title company has accounted for in the preliminary statement. The title company is still waiting on his 1st mortgage payoff info..

I also found out the judgement was entered 6-19-2019 for a "6 month redemption period" 

-My question is, is this all going to go as smoothly as it seems? I have never dealt with a property in this stage of foreclosure and one with a 1st and 2nd mortgage.

Im just trying not to get screwed! Is there anyway the seller could be pulling one on me somehow? Purchasing the property from me then redeeming it himself with the funds? 

Not sure how it all goes! Looking for any help, thanks in advance!

@Robert Obniski Has the property actually been foreclosed? Which lien was foreclosed the first or the second position? If the second was the foreclosing entity then the first position lien stays in place. If the first lien position was foreclosed then the second lien should not be an issue. If the property is in its redemption period then the proceeds from the sale will go to whomever purchased the property at auction including any interest and fees and if there is anything left over then it will go to the seller. Your title company should be able to answer these questions for you. It seems like there is some missing info here.

@Robert Obniski Yeah, Who is the owner now?  I assume from your post, the actual foreclosure auction has Not happened yet and you are buying from the borrower.....if so, this is just like any other sale.  Redemption rights only kick in if the property Actually goes to the foreclosure auction sale.  In a straight up sale from the borrower, there is no redemption right.

Icon the other hand, the foreclosure sale Did occur, the title company will have to verify the redemption right, and follow proper procedure, and of course insist on title insurance with no Exceptions relating to the redemption issue.  I’d have my own real estate attorney review it.

@Robert Obniski

if the foreclosure has not happened, then make sure whatever you are paying for the property is enough to pay off the 1st Judgement amount, the 2nd mortgage and any other liens.  However, if this is going through a title company then they will verify all this for you and not close if this isn't the case.  Otherwise the seller would need to bring a check to the closing to cover the difference.  

@Wayne Brooks @Lydia T. @Chad U.

Thanks for the replies everyone. I understand the situation better now. I don't believe it went to auction yet, should I just check the sheriff website for that? 

If you go here -> https://wcca.wicourts.gov/caseDetail.html?caseNo=2019CV000016&countyNo=13&index=0
You will see under the "court records" that the last few records mention the judgment and the 6 month redemption period. 

I understand the process, Im just not positive where in the process they are.

@Robert Obniski In Wisconsin, the redemption period refers to a 6 month period after the foreclosure judgment in which the borrower can come up with the funds to reinstate or payoff the loan. After the 6 months has passed, the sheriff's sale can occur, followed by a confirmation of sale hearing about a month later. In your situation, the sheriff's sale has not occurred and the sale has not been confirmed, which means the property is in pre-foreclosure. As long as your purchase price exceeds the first and second mortgages and everything else the seller owes, then you are good to go. This will close like any other transaction and the seller will get the net proceeds after everyone else has been paid off.

"Redemption" can be a confusing term because the courts don't use specific language to specify whether it's pre or post sale. As others have mentioned, in post-sale redemption states, the foreclosure sale happens first and then the previous owner gets a specified time in which to redeem the property. In WI, redemption means "pre-sale."