Overview
The Statutory Right of Redemption is a legal provision that allows a mortgagor (borrower) to reclaim their foreclosed property after it has been sold at a foreclosure sale. This right is provided by state law and is effective for a limited period, which varies from state to state. It offers a second chance for borrowers to redeem their properties by paying the full amount owed, including any additional costs incurred during the foreclosure process.
Examples
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Alabama: In Alabama, the statutory right of redemption allows a debtor up to one year after a foreclosure sale to redeem the property by paying all the indebtedness owed, including interest and fees.
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Texas: In Texas, there is no statutory right of redemption for non-judicial foreclosure sales. Once a property is sold at a foreclosure sale, the sale is final unless overturned by the courts, typically on procedural grounds.
Frequently Asked Questions
What is the difference between the statutory right of redemption and the equitable right of redemption?
The statutory right of redemption is provided by law and offers a period after the foreclosure sale during which the mortgagor can redeem the property. The equitable right of redemption is a common law right that allows the mortgagor to redeem the property anytime before the foreclosure sale.
How does one exercise the statutory right of redemption?
To exercise the statutory right of redemption, the mortgagor must pay the total amount of the foreclosure sale price, including any allowable costs such as interest, fees, and legal expenses, within the time frame specified by state law.
Can the statutory right of redemption be waived?
In some states, the statutory right of redemption cannot be waived by agreement in the mortgage contract or otherwise because it is a protection provided by state law for the benefit of borrowers.
Do all states have a statutory right of redemption?
No, not all states provide a statutory right of redemption. The availability and duration of this right vary widely among states.
- Foreclosure: The legal process by which a lender or secured creditor either sells or repossesses a parcel of real property after the borrower has failed to comply with the loan agreement.
- Equitable Right of Redemption: A common law right allowing a mortgagor to redeem their property by paying off the full amount owed at any time before the foreclosure sale.
- Deficiency Judgment: A ruling made by a court when the sale of a foreclosed property does not cover the outstanding debt. The borrower is required to pay the remaining balance.
- Non-Judicial Foreclosure: A type of foreclosure process that does not require court intervention, typically used when the mortgage contract has a ‘power of sale’ clause.
Online Resources
- Investopedia - Understanding Statutory Right of Redemption
- Nolo - Foreclosure Laws by State
- CFPB - Mortgage Servicing Rules
References
- “Foreclosure Investing For Dummies” by Ralph R. Roberts
- “The Foreclosure Survival Guide” by Amy Loftsgordon
- “Real Estate Law” by Marianne M. Jennings
Suggested Books for Further Studies
- “The Foreclosure Survival Guide: Keep Your House or Walk Away With Money in Your Pocket” by Stephen Elias
- “The Complete Guide to Developing Commercial Real Estate” by Robert A. Wehrmeyer
- “Urban Real Estate Investment: A New Era of Opportunity” by Henry Cisneros and Arthur C. Nelson
Real Estate Basics: Statutory Right of Redemption Fundamentals Quiz
### What does the statutory right of redemption allow?
- [x] A mortgagor to redeem their property after a foreclosure sale.
- [ ] A lender to claim additional fees after a sale.
- [ ] A tenant to lease a property after a foreclosure.
- [ ] A broker to sell a property without owner consent.
> **Explanation:** The statutory right of redemption allows a mortgagor to redeem or reclaim their foreclosed property by paying the required amount within a set time after the foreclosure sale.
### How does the redemption period vary?
- [x] It varies by state law.
- [ ] It is fixed at one year in all states.
- [ ] It depends on the lender's discretion.
- [ ] It changes based on the property type.
> **Explanation:** The redemption period is determined by state law and can vary widely across different states.
### Which state has no statutory right of redemption for non-judicial foreclosure sales?
- [ ] Alabama
- [ ] California
- [ ] Florida
- [x] Texas
> **Explanation:** Texas does not offer a statutory right of redemption for non-judicial foreclosure sales; the sales are final unless legally overturned.
### Can the statutory right of redemption be exercised without full payment of indebtedness?
- [ ] Yes, partial payments are allowed.
- [x] No, full payment including all costs is required.
- [ ] It depends on the lender's policy.
- [ ] Only if the lender agrees to partial payments.
> **Explanation:** Full payment of the foreclosure sale price, including any allowable costs, is required to exercise the statutory right of redemption.
### When can the equitable right of redemption be applied?
- [x] Any time before the foreclosure sale.
- [ ] Any time before the redemption period ends.
- [ ] Only during bankruptcy proceedings.
- [ ] Only after the statutory redemption period ends.
> **Explanation:** The equitable right of redemption can be applied anytime before the foreclosure sale to reclaim property by paying the owed amount.
### Is the statutory right of redemption available in every state?
- [ ] Yes, it is universally available.
- [x] No, it is state-specific.
- [ ] Only in judicial foreclosure states.
- [ ] Only for commercial properties.
> **Explanation:** The statutory right of redemption is state-specific, and not all states provide this right.
### How does one start the statutory redemption process?
- [x] Pay the full amount owed including additional costs.
- [ ] File a lawsuit against the lender.
- [ ] Submit a partial payment and negotiate terms.
- [ ] Demand a new appraisal of the property.
> **Explanation:** To start the statutory redemption process, the debtor needs to pay the full amount owed, including any additional costs incurred during foreclosure.
### What is the purpose of the statutory right of redemption?
- [x] To allow borrowers a chance to reclaim their foreclosed property.
- [ ] To increase the lender's security on the loan.
- [ ] To expedite the foreclosure process.
- [ ] To adjust property taxes after a sale.
> **Explanation:** The purpose is to offer borrowers a chance to reclaim their property post-foreclosure by settling their debt within a designated time frame.
### What must a state provide for statutory redemption to apply?
- [ ] A specific lender policy.
- [ ] Federal government approval.
- [ ] A clear set of rules in state law.
- [x] A legal provision in state statutes.
> **Explanation:** The statutory right of redemption must be enabled by specific legal provisions in state law to be applicable.
### Are foreclosure sales always irreversible without the statutory right of redemption?
- [ ] No, they can often be overturned easily.
- [ ] Yes, they are permanently final.
- [x] Generally, they are final unless overturned by courts on procedural grounds.
- [ ] Only if the borrower agrees to the sale terms.
> **Explanation:** In states where the statutory right of redemption is not available, foreclosure sales are generally final unless reversed by courts due to procedural errors.
