The Trouble With Post-Sale Redemption Rights
Today’s StarTribune carried an article about a common problem with the current real estate market: who takes care of a foreclosed property after the foreclosure sale? Minnesota is one of only ten (10) states which provides for post-sale redemption rights. Other states allow for redemption prior to the foreclosure sale, with the result that the lender owns the property free and clear after the sale.
The problem with post-sale redemption rights lies in the care and maintenance of the property after the sale. Because the homeowner has the right to possession of the property during the redemption period, lenders are at risk of having the property ransacked during the six (6) month redemption period. I recently talked with an individual who signed a purchase agreement on a foreclosed property just after the sale but prior to the redemption period running. At the end of the redemption period, this person found the property stripped of everything – light fixtures, hardwood floors, countertops, appliances, you name it.
Some lenders do choose to secure the properties by changing the locks on the property, but this action violates Minnesota law as it prevents the owner from exercising his/her possessory rights during the redemption period. Although Minnesota has a procedure to shorten the redemption period to five (5) weeks if the property is abandoned, the lender must initiate a court action in order to utilize this procedure. I rarely see a lender taking this extra step to shorten the redemption period, as it already is expending significant costs to hire an attorney to handle the foreclosure as well as paying for property taxes and other holding costs.
There have been a number of legislative fixes proposed over the past several years as a result of Minnesota’s foreclosure crisis. Maybe it’s time the Legislature debate the merits of going to a pre-sale redemption period.
You would be surprised at how many loans are accelerated to the 5-week redemption once the property is abandoned.It’s really up to the Bank’s Realtor(R)to stay on top of the property.