What Is a Redemption Deed?

What Is a Redemption Deed?
A deed redemption allows you an opportunity to reacquire your home after tax foreclosure.

Redemption Period

The redemption period varies by state. In Oregon, for example, you have two years after the circuit court issues a judgment and decree to redeem your property. Some states offer a shorter period. In Michigan, you have only six months to reacquire your property. During this time, you must pay your tax delinquencies and any interest and penalties to retain your property. In most states, only the original owner, the owner's heir, a lien holder or someone with legal interest in the property can redeem the property.

Tax Deed

In addition to granting you time to clear up your delinquency, the taxing agency issues several reminders about delinquent taxes. If you choose to ignore the reminders and do not pay the delinquent taxes, your state will take steps to recover the past due taxes. The recovery process varies -- many states foreclose on the property and auction it for the back tax amount plus fees, penalties and interest. The successful bidder becomes the owner, and ownership of your property transfers to this bidder via a tax deed.

Right of Redemption

As the original property owner, you have the right to recover your property even after a tax deed has been issued. This is called the right of redemption, but it must be done within a certain time frame. In Texas, for example, the right of redemption period after a foreclosure is six months after the foreclosing agency mails the notice of sale. Note that the right of redemption applies when a taxing agency forecloses because of delinquent taxes; there are no redemption rights for foreclosures due to nonpayment of mortgage loans. During the redemption period, the purchaser cannot sell the property to anyone but the redeeming owner.

Considerations

The state's aim is to collect delinquent taxes and it may, therefore, sell your property far below the market price. The purchaser of such property has an opportunity to purchase property at an exceptional discount. Usually, you do not have the option to finance this purchase and the purchase must be completed quickly -- sometimes in as little as 24 hours. You should view the property in order to see if it is suitable. Make certain that you are familiar with the procedures of the particular state. Keep in mind the original owner's right of redemption. Although you may gain a home at a reduced rate, the owner's right to redeem may make your home ownership short-lived.