Right of Redemption Issues for Investors in Texas
Right of Redemption Issues for Investors in Texas
If you’re investing in property in Texas, foreclosure or tax sale properties can be an attractive option. But before you invest, you should understand the laws in Texas surrounding the original owner’s right of redemption, or right to reclaim the property, under Texas law.
Right of Redemption
Under the Texas Tax Code, certain property owners have a right to redeem or recover the property within two years of the foreclosure sale. The right of redemption only applies to tax or HOA foreclosure sales, not any other foreclosures related to liens or mortgages on the property.
1. Agricultural Land or Primary Residence
If the property was a primary residence or agricultural land, the original owner has two years to “redeem” or recover the property by paying the purchaser the amount of the purchase, recording fees, taxes, penalties, interest, and costs, as well as a 25-50% redemption premium. The amount of the redemption premium will vary based on when the owner redeems the property.
The “costs” the new owner can charge include costs “for maintaining, preserving, and safekeeping the property,” which would include insurance, legally-required repairs, payment of municipal liens imposed for health or safety reasons, HOA dues, and utility impact or standby fees.”
2. Properties Subject to an HOA
The redemption rules change if an investor purchases a property from a homeowner's association foreclosure. Under the Texas Property Code, the original owner will have only 180 days after receiving written notice of the sale from the HOA, which must mail it within 30 days after the sale. To redeem the property purchased by a third-party investor, the original owner must pay:
- Amounts owed to the HOA,
- Purchase price of the investor,
- Taxes, penalties, and interest,
- Deed recording fees, and
- Costs incurred during eviction.
The original owner will not have to pay a redemption premium.
3. Other Property
The redemption rules also differ for property purchased in a tax foreclosure sale that isn’t a primary residence or land designated for agricultural use. The original owner only has 180 days to redeem the property, and the redemption premium is limited to 25%. The redeeming owner must still pay all costs, interest, and fees.
Hire an Experienced Surplus Funds Recovery Attorney
If you’re looking to purchase property in a foreclosure sale as an investment, it’s important to be aware of Texas law regarding the owner’s right of redemption. Because the process is nuanced and must be followed exactly, it’s important to have an experienced foreclosure attorney guiding you through the process. Find out how the seasoned attorneys at Manfred Law can help. Call them at (713) 547-5460 or contact them online to schedule your consultation.
