The owners may be able to get the home back after the foreclosure, but not by catching up on their mortgage payments. They would have to repurchase the home by paying you the purchase price you paid at the foreclosure sale, plus various other charges. This is called redeeming the property. Because the distressed former homeowner has to come up with so much cash to get the house back, redemption is rare.
The Right to Redeem After Foreclosure in Alabama
The redemption period after a foreclosure sale in Alabama depends largely on when the foreclosed homeowners took out their mortgage.
Mortgages before January 1, 2016. Alabama law gives homeowners a one-year redemption period after a foreclosure sale.
Mortgages after January 1, 2016. Alabama law gives homeowners a 180-day redemption period after the foreclosure sale for homestead properties—if proper notice about the right to redeem was given. (Ala. Code § 6-5-248(b).) By law, the foreclosing party must mail the homeowners a notice about the right to redeem the home at least 30 days before the foreclosure sale. (Ala. Code § 6-5-248(h).) If the notice isn’t mailed to the homeowners at least 30 days before the foreclosure sale, they get 180 days to redeem the homestead property from the date the notice is provided. But the homeowners can’t redeem more than one year after the sale.
It’s also possible, but exceedingly rare, for some other party to redeem the property, such as other creditors who had liens on the home.
Another very rare possibility is the IRS redeeming the property after a judicial or nonjudicial foreclosure, if there was a federal tax lien on the home. The IRS gets 120 days (or the allowable period under state law, whichever is longer) to redeem. If the IRS considers redeeming the house, it would send you a notice beforehand.
The Homeowners Can Lose the Right to Redeem
After you purchase the property at the foreclosure sale, you can demand that the homeowners vacate the property. To do this, you must deliver a written demand for possession to the homeowners. If they do not move out of the home within ten days after you give them the notice, they lose the right of redemption (Ala. Code § 6-5-251).
How the Homeowners (or Other Party) Redeems in Alabama
To redeem the property, the former homeowners (or other redeeming party) must send you a written demand requesting a statement of all amounts you’ve spent on the property since the foreclosure sale. You must then provide an itemized statement within ten days of the demand. If you do not provide the statement within ten days, you lose the right to compensation for any improvements you made to the home since the foreclosure sale (Ala. Code § 6-5-252).
How Much the Foreclosed Homeowners (or Other Party) Must Pay to Redeem
In order to redeem the property, the foreclosed homeowners (or other redeeming party) must pay you the purchase price you paid at the foreclosure sale, plus all allowable charges such as:
- the value of any permanent improvements you made to the property since the sale (though the redeeming party may challenge your valuation of the improvements)
- taxes you paid (or that are assessed)
- all insurance premiums you paid, and
- any valid lien you paid (Ala. Code § 6-5-253).
What Will Happen if You Don’t Give Up the Property
Once the redeeming party pays the appropriate amount within the redemption period, you must convey (sign over) the property to that party. If you fail to do so or refuse to transfer the home, the redeeming party may file a lawsuit against you to enforce the right of redemption (Ala. Code § 6-5-255).