Avoiding Risks in Buying a Foreclosed House

[Buggzter]

My question involves real estate located in the State of: Michigan

Hi everyone. My family is trying to buy a house in Michigan. It is a foreclosure, and for sure not lived in since at least early December (6 months now) when it was winterized (too late, since there is some broken plumbing), but not more than a year since it was only winterized this one season.

It's Bank of America owned, so it's not at all easy getting any information and they have a nation-wide addendum to the sales contract that adds lots of details that are irrelivant to this house. My dad (who is purchasing the house, rather MIGHT be) does not want to sign it if there is a chance there will be a redemption on the house (however unlikely). He also doesn't like the clause that says he would be responcible for any tenant-owed security deposits: as far as anyone knows right now, there was never a rental tenant at this property, so it should be a moot point but we don't KNOW and that bank doesnt know.

My questions:

How do I find out when the redemption period will end or ended?

How do I find out if the house HAD tenants?

Is there anything else you suggest we find out first before signing to buy this house from the bank?

NEW: Would the cost of redemption for the last owners be the amount my family pays plus fees or the amount the BANK paid plus fees? They paid 176K last October (guessing that's the bank they paid - see below), we'd purchase for less than that... Also, if they redeem, do we get our money back for the property, or are we out of luck???

THANK YOU!!!!




EDIT: Ok, found the sales history on public record. Sold in 2005 for 209K, but last sale was for $176,039 on 10/27/11. I'm guessing that's to the bank itself. In what case would this be a 1 year redemption period, and how do I find out if it is? If it were for 6 months, that is no longer available as of 4/27/12 (which is a month gone already). So we'd only have another 5 months left for redemption anyways.

[jk]

yes, there is a redemption period. It varies from 30 days to 1 year, depending on the situation. In this case, since it appears the property has been abandoned, the redemption period should be reduced to the 30 day period. The problem with that is the lender has to have either observed the abandoned condition or sent notice to the debtor stating they consider the property abandoned which the debtor has not responded to. If they haven't, the time period changes. The next period is for residential properties with less than 4 units on the property nor includes more than 3 acres. Then, the the debt owed is at least 2/3 of the original debt, the period is 6 months. If neither of those situations apply, the redemption period is 1 year.


As to the security deposit situation: if that is what the lender chooses to impose, they can. What you need to do is attempt to discover whether the unit was used as a rental or was owner occupied. If owner occupied, you would be safe. If it was a rental, either figure out if and how much any deposit owed is or pass on the sale.

[Buggzter]

Thanks for your help JK. I really don't think it would be a 1 year redemption from both what you said and what I've found. The property is about .2 acres, a single family residence, and was purchased by the bank 7 months ago.

Best case senerio: redemption period is over, no problem.

Worst case senerio: redemtion period is still active for 5 months, in which case they still have to come up with the money!


*next question*
If we purchased the house for, say 108K, and the last owners wanted and could redeem. Would they have to pay the bank 108K or the 176K the bank paid? And would we get our money back when the sale was anulled? With that information, I think we could make a good decision whether to take this house.

THANK YOU!

[jk]

to redeem the property, the original owner must pay the amount paid by the purchaser at the auction plus interest on that at the rate of the mortgage from the time of the purchase until the redemption.

If it is redeemed, the purchasers deed is voided which means they could not have sold you the property so they (the bank) will have to return your money.



as to the time period, the only other germane fact you did not include was whether the amount of the indebtedness compared to the original indebtedness.

[Buggzter]

Thanks JK. Unfortunately, the bank won't disclose that information... So I'm guessing it's likely that it's more than 2/3 the orriginal debt, considering it's only 6 years after the purchase of the house by the last owners that the foreclosure happened.

This will likely reassure my dad enough to make the purchase (knowing that his money would be returned).

[jk]

have you outright asked the bank what the redemption period is? They should know that given the fact they are loaning mortgage money.

[Buggzter]

We've tried, at least. I'm going to have our realtor ask them once more to see what we can find out.

I spoke with my parents today, and they feel that as long as we figure out the redemption period OR the amount they have to pay back for redemption, we likely will sign for the house. If in fact the prior owners have to pay back $176K and we buy for around 100K, my dad is going to assume they are not going to redeem a house worth 100k for nearly twice that.

Also, if the redemtion period is past or most likely past (my dad has to be fairly sure himself, not just me) then he'll sign for it too.

I will ask Dad if he will check with the realtor about the redemption date. Thanks!

[Buggzter]

Glad it helped! We researched some more. Found out the redemption period ended just over a month ago, so we're safe. We rebid on the house and are waiting to hear from the bank. Unfortunately there are now 4 other bids, but apparently we're the only cash bid and more likely to get it with that reason. Fingers crossed! Thanks for the advice JK