Right of Redemption in Alabama

8 Replies

My partner has purchased a property in Bessemer, Alabama that was foreclosed on. The bank foreclosed on the property with a balance of roughly $15,000. The property was then sold at a loss to someone else who then sold the property to my partner. My partner paid roughly $10,000 for the property. This is my question. IF the person were to redeem the property during their right of redemption period, who would they pay and what amount? I've asked an attorney who says that the bank would be paid their $15,000 and my partner would NOT be paid his $10,000. I understand there would be interest, fees and improvements to be reimbursed, but the purchase price my partner paid would not be reimbursed? This doesn't seem right to me, but I'm not an attorney so maybe I'm just not understanding the law. I've read the law and am not able to interpret it clearly, so I'm giving the scenario in hopes for a clearer answer/explanation. 

If someone redeems, they must pay the current owner at time of redemption--your partner--the auction bid price plus 7.5% per annum interest, plus the value of any improvements made to the property since the date of the foreclosure auction, plus 7.5% interest, plus the cost of any casualty insurance premiums, plus 7.5% interest. The bank is out of it. They get nothing. When they sold the property after the auction, they go what they wanted. That's the end of it for them, unless they have the ability to pursue the borrower for any deficiency balance on the note. THat is between the two of them, and does not involved your partner.

@Cheryl Bennett , sorry for the typos in my answer above. Guess you figured out it was "...they got what they wanted..." and "...does not involve your..."  I knew you were anxious for an answer, but my brain works better in the morning than at night:)

In addition, if there were any other liens on the property that got wiped out by the foreclosure, the redeeming person will have to pay all of those other liens, also, to those lienholders.  In other words, they can't "launder" their title by washing it through a foreclosure and then redeeming and paying only the auction price.

If the bank still owned the property, and there was a balance due on the note for after the foreclosure, the redeeming party would redeem from the bank and have to pay the full balance on the note, not just the auction bid price.  Maybe that is where the other lawyer jumped the track in his/her misunderstanding of the law.

On the flip side, just to know for the future if you do more foreclosure investing, suppose the bank credit bid the property for $15,000 and then sold it to someone for $20,000 and that person sold it to your partner for $25,000. The redemption price tag is the same as explained in my prior answer, and starts with the $15,000 winning auction bid.  The fact that other people paid more than that for post-foreclosure sales is irrelevant. Unless the interest and improvements racked up enough to cover the additional $10,000 paid by your partner over the auction bid price, your partner would lose $10,000 on a redemption.

@Denise Evans Thank you so much! That was a perfect explanation! I appreciate that so much. Do you do evictions? If so, would you send me an email with the cost for that? It's in my profile and won't let me post that email address here. We do hope to do more of these going forward and I will probably need an attorney to handle the evictions for us at some point. 

My law license is technically in Texas, because that is where I lived when I was an active litigation attorney.  I cannot do evictions in Alabama because I don't have an active license here. I can recommend Sarah Taggart in Huntsville (who does evictions all over the state) and Greggory Deitsch at Sirote Permut who is in Birmingham and does them all over the state, and Larry Darby in Montgomery, who does them in the Montgomery and Auburn areas.  All of them are good, and their prices are around $750 or less for evictions with default judgments.

Thanks John, it definitely helps to get feedback from other people. I'll make a note. I hope we don't need her either, but I found out the hard way that it's good to have people already "vetted" BEFORE you need them. Thanks again. 

I can vouch for Sarah we use her for our property management company and she has been great to work with.

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