When you buy property at auction in a state that has redemption laws, you get a special deed or special title. Because the owner has a number of months in which they can repay the purchase price and redeem their property, it’s called a defeasible title. That is, one that can be defeated, which means that you don’t have clear title yet.
Securing Redemption Rights
When purchasing redemption rights, you may be dealing with an owner who is under a great deal of stress and may not be aware of the amount of equity they have in their property. Though they may be able to get more for their redemption rights, the rule of thumb is to offer the owner $1,500. They may ask for more, but you should weigh the amount of equity involved.
Furthermore, there’s a good chance that the owner you’re buying redemption rights from is currently handling a great deal of stress -their property is being auctioned off! It’s likely that they’re not aware of the equity. You however, as the buyer, should be aware of such. Tradition and, well, ethics pertain to the rule of thumb: $1500 for redemption rights. Should they ask for more, check the property’s equity and again, consult your attorney.
This note is used to buy property, and comes with a security instrument -a binding legal contract that ensures you pay the note in full. This is called a deed of trust, or more popularly, a mortgage (though the two are different things). Should the borrower be unable to pay the note in full, the lender can take the borrower to court, or even put the property under foreclosure -the process of taking the property as collateral for the money borrowed.
Notes, deeds of trust, mortgages, real estate -an overview
3 parties are always involved in a deed of trust sale:
Trustor: otherwise known as the Borrower
Beneficiary = Person lending the money (mortgagee)
Trustee: Whoever is handling the transaction
These two are separate and different documents, yet serve a single purpose: ensuring that the loan is paid in full, and should the Trustor fail to do so, securing the perused property as collateral.
There are two major strategies in the foreclosure business:
Short Sale
Equity Split
Sometimes however, should the property and case require it, there is the “subject to” transaction which bases purchase on the existing financing of the real property.
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