Foreclosure laws and timelines vary widely from state to state, making the foreclosure-buying process relatively easy in some states and quite difficult in others. Generally, the ease of the foreclosure-buying process hinges on whether a state uses mortgages or deeds of trust for the purchase of real property. States that use mortgages conduct judicial foreclosures, which go through the court system and tend to be more complex and lengthy, while states that use deeds of trust conduct non-judicial foreclosures, which are handled outside of the court system and usually are faster and more straightforward.
For potential buyers looking to acquire a foreclosure property with minimized aggravation, the two aspects of the foreclosure process that matter most are the length of the pre-foreclosure timeline and the previous owner’s redemption period. Some states allow for long pre-foreclosure and redemption periods which favor the previous owner’s rights over those of a potential buyer. Of course, potential buyers prefer that these periods be abbreviated so they can secure their investments sooner.
For Buyers, Shorter Pre-Foreclosure Periods Are Preferred
The pre-foreclosure period is the length of time between when the owner is notified regarding the default and when the property is eligible to be sold by the bank. When a property is in the pre-foreclosure period, the owner still has an opportunity to pay off what is owed or to sell the property, thereby stopping the foreclosures process. This period of time is wildly inconsistent from one state to another and the differences can range from just days to more than a year. For instance, in the state of Texas the pre-foreclosure period of 27 days is the shortest of all 50 states. If this still seems like a long time to wait for a property to become available, just consider the 290-day period observed in Wisconsin or the 445-day period observed in New York!
A Long Redemption Period Adds Risk to Any Purchase
Potential foreclosure buyers also prefer short redemption periods — or no redemption period — because these provide the best security that the purchase won’t be overturned. The redemption period is the time the original owner is given to buy back a property after it has been sold by the bank as a foreclosure. In states such as Idaho, Kansas, Kentucky, North Dakota and Wisconsin, the redemption period is up to one year, whereas the District of Columbia, Georgia, New Hampshire, Texas and Virginia have no redemption period at all.
Based on a buyer’s ideal scenario of having a short pre-foreclosure period and no redemption period, the easiest places in which to purchase foreclosure properties are Texas, Georgia, Virginia, District of Columbia and New Hampshire. Using the same criteria, the most difficult states are Wisconsin, Idaho, North Dakota, Kentucky and Kansas. The tables included show each state represented by its individual pre-foreclosure period and redemption period, based on information currently available.
The Five Easiest States for Buying Pre-Foreclosures and Foreclosures
State Pre-Foreclosure Period Redemption Period
1. Texas 27 days None
2. Georgia 37 days None
3. Virginia 45 days None
4. District of Columbia 47 days None
5. New Hampshire 59 days None
The Five Most Difficult States for Buying Pre-Foreclosures and Foreclosures
State Pre-Foreclosure Period Redemption Period
1. Wisconsin 290 days 365 days
2. Idaho 150 days 365 days
3.North Dakota 150 days 180-365 days
4. Kentucky 147 days 365 days
5. Kansas 130 days 365 days
For anyone interested in purchasing a foreclosure property, it’s important to investigate current state foreclosure laws. The saying “buyer beware” applies to much more than the condition of the property being sold. To be a truly savvy investor, you need to keep abreast of the legal processes that govern the sale of foreclosure properties — especially with regard to redemption periods. After all, finding out that your newly purchased property could be taken back from you at any time during the course of a year or more would be a definite shock if you weren’t aware the possibility existed.
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