Author Topic: Buying foreclosures in NM  (Read 3287 times)

HeidiO

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Buying foreclosures in NM
« on: April 14, 2012, 02:57:42 PM »
  I am looking for a rental to buy in New Mexico, so of course several of the houses are foreclosures.  I know NM has a 9 month redemption period, where the old owner can buy the house, or sell the right to buy the house to a new owner for a fee, for the same price as it is being sold by the bank.  I believe the redemption period starts after the house is sold.  Does anyone have experience with this?  I am hoping to find out I am misunderstanding something.  I am afraid I'll buy a house for $60,000, spend $20,000 on it and 8 months later the old owner will be able to pay $60,000 and get it back, or more likely, could sell for $1000 the right to buy the house for $60,000 to a friend/family member/investor.
Thanks,
Heidi

arebelspy

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Re: Buying foreclosures in NM
« Reply #1 on: April 15, 2012, 09:02:53 AM »
Yikes.  Your post interested me, so I went to Google and did a little research.

That right of redemption is scary.  You're right, that's a big risk you take, putting money into a property.

However, the redemption rights should start after the house is sold at auction, if there was a high bidder and it changes hands.  My only question is if there was a trustee's sale, and no one bids, and the bank takes it... does that count as a high bid and it changing hands (from the homeowner to the bank)? And does the redemption period start then?

Some things I've found online indicate that if the bank has held the (former) foreclosure long enough, and you buy that REO, it'll be out of the redemption period.

Bottom line: if you're considering it, consult with an attorney familiar with the local laws.

Or look for creative ways to avoid it (notes, tax liens, or more traditional things like REOs and Short Sales). 
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arebelspy

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Re: Buying foreclosures in NM
« Reply #2 on: April 15, 2012, 09:10:51 AM »
One other thing that occurred to me: it's only a worry in an up market where there's equity.

Imagine a more common situation today:
Owner owes 150-200k.  House is worth 100k.

You buy it for 100, hopefully less. 

To get the house back (in New Mexico), the owner needs to come up with the amount owed, all fees and penalties, costs of the foreclosure, AND 10% interest.  So they owed way more than it's worth, and then on top of that will owe a bunch extra.  Why the heck would they want to redeem that?  They'd suddenly be paying 150-200k+ for a property worth maybe 120 (if you fixed it up).

So when you're purchasing you may be able to find out the amount they owed, and if it's way above the fair market value, you know there's almost no chance they'll redeem (there's almost none anyways, because they just won't have the money, or they wouldn't have been foreclosed on in the first place - if they couldn't pay their 1,000 mortgage bill, how are they gonna come up with 150k?, but about a 0% chance they'll pay way more than it's worth to take over a house that was underwater).
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HeidiO

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Re: Buying foreclosures in NM
« Reply #3 on: April 15, 2012, 09:33:23 PM »
My realtor says she has never heard of it being an issue-so obviously it isn't happening much.
One thing that changes your equation though, is that the right of redemption is on the new sales price, not the old loan amount, (but it is plus interest, fees, etc.)  And then the right of redemption is sellable - I see an ad on craigslist every few months.   But I am probably worrying about nothing.  Especially because I have my eye on a non-forclosure right now.  Can't see it in person though until Tuesday - drat!

arebelspy

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Re: Buying foreclosures in NM
« Reply #4 on: April 16, 2012, 07:41:53 AM »
One thing that changes your equation though, is that the right of redemption is on the new sales price, not the old loan amount, (but it is plus interest, fees, etc.) 

Again, check with a lawyer familiar with it, because I see multiple sites online that say:
"by making payment in full of the sum of the unpaid loan plus costs, taxes and interest at the rate of 10%."

while others that say:
"by paying the amount of the highest bid at the foreclosure sale, plus costs and interest."

So I don't know if it's based on what they owed, or based on what it sold for.
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