If you're going to buy Foreclosure Properties, don't forget that there's a RIGHT OF REDEMPTION
I'm writing this article because of a recent run-in with a prospector of real estate after this prospector purchased a property at a local county constable's sale. This property belonged to a homeowner who had fallen several years behind on the maintenance assessments to the community association, and simply could not come up with the necessary funds to rescue the home from the clutches of foreclosure.
Now I am not decrying the business of buying and selling foreclosure properties -- this is America after all, and the foreclosure mechanism is just another animal by which wealth is redistributed to those who can afford it from those who cannot. It really makes for a rather efficient transfer of property in most cases; however, Texas Property Code section 209.001, et seq., does recognize a homeowner's absolute right to redeem such a foreclosed property within 180 days after the foreclosure sale commenced if a property owner's association lien is the instrument being foreclosed upon. It's called the Texas Residential Property Owners Protection Act and it is very much alive and well.
In fact, Section 209.011 of the Texas Property Code states that "[t]o redeem property purchased at the foreclosure sale by a person other than the property owners association, the owner must pay to the purchaser of the property:
(a) any assessments levied against the property by the association after the date of the foreclosure sale and paid by the purchaser;
(b) the purchase price paid by the purchaser at the foreclosure sale;
(c) the amount of the deed recording fee;
(d) the amount paid by the purchaser as ad valorem taxes, penalties, and interest on the property after the date of foreclosure sale; and
(e) taxable costs incurred in a proceeding brought under Subsection (a)."
Tex. Prop. Code § 209.011(e)(2). Thus, if a homeowner has the funds necessary to comply with those sums listed in the above provision, and that homeowner tenders said amounts to the purchaser of the foreclosed property, then the purchaser must allow the homeowner to redeem the property. It's that simple.
I have attended some constable's foreclosure sales in the past and I cannot tell you how many uninformed, ill-advised, uninitiated prospectors I've seen purchase property after property without having the faintest clue that the property is subject to purchase money liens, government tax liens, etc. These buyers lack the understanding of priority lien concepts, assumption of mortgages, and other pitfalls that come along with foreclosure sale prospecting. Instead, these people buy the property in hopes of turning a quick buck, ignorant of the laws under which they purchase, then trample the rights of those people who would attempt to redeem when such a situation becomes tenable. Now back to the original prospector I was speaking about.
In this case, the homeowner obtained the necessary amounts to redeem under section 209.011 of the Texas Property Code, tried to redeem the property from the purchaser, but the purchaser refused the redemption offer. The purchaser demanded all sorts of outlandish sums for property management, attorney's fees, and "research costs" for prospecting the property. It was obvious that the prospector was conducting a "money grab" -- attempting to attach all manner of ethereal charges to the property -- so that the profit margins could be artificially boosted on the purchase if the homeowner ever tried to redeem. The homeowner, distraught and not knowing where to turn to, actually asked the community association for help.
The homeowner may have the last laugh here because the right to redeem goes hand in hand with the foreclosure sale and is not to be ignored if such a remedy is sought. Texas Property Code section 209.011(f) states that “[i]f a purchaser fails to comply with this section, the lot owner may file a cause of action against the purchaser and may recover reasonable attorney’s fees from the purchaser.” So now, the homeowner may seek recovery of all attorney's fees incurred in the fight to redeem the property. The law is clear in this case, the homeowner can redeem if it complies with the statutory provisions of the Texas Residential Property Owners Protection Act. All the homeowner needs to do is tender those amounts listed under Section 209.011. In turn , the purchaser of the property must tender a deed back to the homeowner or suffer civil penalty.
Ultimately, I hope that the purchaser at least learns a valuable lesson from all of this legal wrangling: the homeowner's right of redemption is absolute under the Texas Property Code when a property owner's association forecloses its lien. Don't be an uninformed prospector; instead know the law regarding foreclosure sales before you buy.
Now I am not decrying the business of buying and selling foreclosure properties -- this is America after all, and the foreclosure mechanism is just another animal by which wealth is redistributed to those who can afford it from those who cannot. It really makes for a rather efficient transfer of property in most cases; however, Texas Property Code section 209.001, et seq., does recognize a homeowner's absolute right to redeem such a foreclosed property within 180 days after the foreclosure sale commenced if a property owner's association lien is the instrument being foreclosed upon. It's called the Texas Residential Property Owners Protection Act and it is very much alive and well.
In fact, Section 209.011 of the Texas Property Code states that "[t]o redeem property purchased at the foreclosure sale by a person other than the property owners association, the owner must pay to the purchaser of the property:
(a) any assessments levied against the property by the association after the date of the foreclosure sale and paid by the purchaser;
(b) the purchase price paid by the purchaser at the foreclosure sale;
(c) the amount of the deed recording fee;
(d) the amount paid by the purchaser as ad valorem taxes, penalties, and interest on the property after the date of foreclosure sale; and
(e) taxable costs incurred in a proceeding brought under Subsection (a)."
Tex. Prop. Code § 209.011(e)(2). Thus, if a homeowner has the funds necessary to comply with those sums listed in the above provision, and that homeowner tenders said amounts to the purchaser of the foreclosed property, then the purchaser must allow the homeowner to redeem the property. It's that simple.
I have attended some constable's foreclosure sales in the past and I cannot tell you how many uninformed, ill-advised, uninitiated prospectors I've seen purchase property after property without having the faintest clue that the property is subject to purchase money liens, government tax liens, etc. These buyers lack the understanding of priority lien concepts, assumption of mortgages, and other pitfalls that come along with foreclosure sale prospecting. Instead, these people buy the property in hopes of turning a quick buck, ignorant of the laws under which they purchase, then trample the rights of those people who would attempt to redeem when such a situation becomes tenable. Now back to the original prospector I was speaking about.
In this case, the homeowner obtained the necessary amounts to redeem under section 209.011 of the Texas Property Code, tried to redeem the property from the purchaser, but the purchaser refused the redemption offer. The purchaser demanded all sorts of outlandish sums for property management, attorney's fees, and "research costs" for prospecting the property. It was obvious that the prospector was conducting a "money grab" -- attempting to attach all manner of ethereal charges to the property -- so that the profit margins could be artificially boosted on the purchase if the homeowner ever tried to redeem. The homeowner, distraught and not knowing where to turn to, actually asked the community association for help.
The homeowner may have the last laugh here because the right to redeem goes hand in hand with the foreclosure sale and is not to be ignored if such a remedy is sought. Texas Property Code section 209.011(f) states that “[i]f a purchaser fails to comply with this section, the lot owner may file a cause of action against the purchaser and may recover reasonable attorney’s fees from the purchaser.” So now, the homeowner may seek recovery of all attorney's fees incurred in the fight to redeem the property. The law is clear in this case, the homeowner can redeem if it complies with the statutory provisions of the Texas Residential Property Owners Protection Act. All the homeowner needs to do is tender those amounts listed under Section 209.011. In turn , the purchaser of the property must tender a deed back to the homeowner or suffer civil penalty.
Ultimately, I hope that the purchaser at least learns a valuable lesson from all of this legal wrangling: the homeowner's right of redemption is absolute under the Texas Property Code when a property owner's association forecloses its lien. Don't be an uninformed prospector; instead know the law regarding foreclosure sales before you buy.
posted by William G. Gammon at 1:33 PM
William G. Gammon
5 Comments:
Hello, my name is Sherrie. I am currently working as a community representative for people in this situation. I have dedicated my time, and life to this industry. Mr. Gammon I first want to say you are a very knowledgable man on the industry and i admire your work, I have read many of your articles and attended classes to help me become familiar with how things work. You are definately the best. While you mention the purchaser and the previous homeowners situation. May I ask, if the previous homeowner is having such a difficult time reasoning with the purchaser whouldn't it also be advisable for the previous homeowner to be told that they can simply go to redeem the property and obtain a quitclaim deed? Here the homeowner really has the last laugh, versus the purchaser who isnt cooperating, and the attorney who is requesting that the purcaser pay the attorney fees.
1:14 PM
I was told yesterday at a foreclosure sale in Texas that if I wanted to be sure that the prior owner would not exercise her right of redemption that I could approach her, offer to pay a fee, and purchase it. In fact, that anyone else could do the same and then bump me off the property! However, I couldn't find any detailed reference as to how you purchase a right to redemption in the Texas Property Code, nor any description of what kind of form or affidavit you might have the prior owner sign, before, I presume, you record it at the courthouse.Do you have any information on this?
3:57 PM
I understand that there is a right of redemption in all or almost all cases however, I'm a bit confused by the wording in Sec. 82.113(g): The exercise of the right of redemption is not effective against a subsequent purchaser... It's not clear here on the timeframe for redemption. Is it still 90 days even if it's not the association as the buyer but an individual?
2. Also, as an individual buyer, if the property is redeemed am I due mortgage payments made in the meantime?
One law office website states it this way, but it's still not completely clear:
To redeem the property within the 90-day redemption period, the owner must pay the purchaser the sale price plus any reasonable attorney’s fees and all costs associated with the foreclosure, and the sale and purchase of the property.
7:52 PM
I recently purchased a property in HOA sale. I understand that original owner has the right to redeem his property for 180 days. However, the original owner is no longer paying his mortgage payment and causing extensive damage to the property while I am waiting for expiration of redemption period. Do I have the right to evict the original owner to preserve the condition of property while I am waiting?
HS
11:03 PM
Absolutely. Under Texas Property Code section 209.011, it expressly states that “a property owners’ association or other person who purchases occupied property at a sale foreclosing a property owners’ association’s assessment lien must commence and prosecute s forcible entry and detainer action under Chapter 24 to recover possession of the property.” Tex. Prop. Code 209.011(a). The “forcible entry and detainer” action is more commonly known as an “eviction” action.
Also, if you do seek an eviction and are successful, but the former homeowner later redeems the property back from you, then under the same section of the Texas Property Code you get to recover the costs of the eviction suit, in addition to other statutorily-prescribed amounts.
Hope this helps, but if you still have further questions, then I would offer that you seek the advice of a real estate attorney before proceeding.
Good luck!
2:37 PM
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