Redemption Following the Tax Sale
In most states, even after the tax sale has been completed, you still have a chance to save your home through a process called “redemption.” You have a specified period of time to do this, and this deadline is strictly enforced, so it is critical that you determine and act within the deadline for your state.
Often you have as long as a year to redeem. But time periods vary, and the redemption will be much simpler and often for less money if you act quickly after the tax sale.
To redeem, you have to pay the entire unpaid taxes, penalties, interest, and the costs and expenses incurred by the purchaser at the tax sale. Typically someone facing a tax sale does not have the cash to make this large lump sum payment. On the other hand, many homeowners facing a tax sale do not have a mortgage on their home—usually if there is a mortgage, the servicer would have paid the property taxes to avoid the sale, and then there would not be a problem of unpaid property taxes.
Having a home free of a mortgage may make it possible to borrow the redemption amount with a new mortgage or with a reverse mortgage. But avoid any lender who seeks you out. Scammers search lists of tax sale properties and contact desperate homeowners with rip-off deals that will just make matters worse for you. If your home equity is a lot more than the redemption amount, you should be able to obtain a legitimate mortgage loan and avoid predatory lenders. Shop around for the best deal. See also the discussion at Chapter 5.
Another option is to ask the purchaser at the tax sale if you can pay the redemption amount in installments. But be careful of the terms. Some speculators purchase at tax sales to take advantage of the homeowner’s desire to redeem. They offer homeowners fraudulent sale-leaseback schemes or high rate loans.
You can also file a chapter 13 bankruptcy and pay the redemption amount in installments on terms you propose and that are approved by the court. Contact a bankruptcy attorney to see whether you have three or even five years to spread out the redemption amount, or whether the amount must be fully paid before the redemption period expires. Also ask the bankruptcy attorney if there are other advantages to redeeming through a chapter 13 bankruptcy.