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Here is what you need to know when buying a foreclosed home

On Behalf of | Sep 22, 2021 | Real Estate Law

If you are a real estate investor, you probably appreciate that foreclosures tend to come with great deals. Foreclosure homes are generally cheaper to buy than other homes. But, these homes also come with something else: Great risks. 

There is no doubt that buying a foreclosed home comes with its share of hazards. To avoid mistakes when buying a foreclosed home, it is crucial that you understand what makes these transactions risky. 

The type of foreclosure is important

In Connecticut, a property can be foreclosed through one of the two judicial procedures: the strict foreclosure where the title is directly transferred to the foreclosing party without involving the sale process, or the decree of sale foreclosure where the court oversees a foreclosure sale. 

If the property is set for a strict foreclosure, the court will declare a specific date, known as “Law Day,” as the last date when the borrower can redeem the home back. On the other hand, if a property is set for a decree of sale foreclosure, or “a foreclosure by sale,” then the borrower is allowed to redeem the property as long as it is yet to be approved for sale by the court. 

What is the duration for redemption in a strict foreclosure?

In Connecticut, the court is responsible for setting the redemption period during a strict foreclosure. Usually, this is the time between the judgment and Law Day. The Law Day can be as soon as 21 calendar days from the date of judgment. (Typically, it will be between 45 and 90 days following the judgment.) If the borrower fails to redeem the property by Law Day, they will automatically lose ownership of the property. 

Under the right circumstances, buying a foreclosed home can be a wise financial decision. However, this kind of transaction calls for proper knowledge, expertise and preparedness to avoid making costly mistakes.