Concept
Redemption Period
What it is
When a property sells at a tax auction or foreclosure, most states give the original owner a statutory window to pay back what you paid plus interest and penalties, and reclaim the property. That window is the redemption period.
“In my state, for example, I believe the redemption period is one year. That means that I could buy this at a tax auction for let’s say 30 grand, got a fantastic deal. But the person who lost the house, they have a whole year to come redeem the property, meaning they pay the $30,000 and they get the house back.”
“Depending on where you live, that could be 60 days, could be one year, or it could even be 3 years, like in Alabama. Quick side note here that some states do not have a redemption period at all. In those cases, if you won the deal at the tax auction, you would have gotten that $300,000 house for $20,000. No takebacks.”
Why it matters
This is the single biggest trap for new auction buyers. If you rehab the property during redemption and the owner shows up “even one day before the redemption period is over” and pays their taxes plus penalties and interest, they get the house back.
The investor gets back their original purchase price plus maybe a little interest. They don’t get back “any money that they spent fixing up the house, any value from appreciation, any of the time, stress, opportunity cost for locking up the money into that deal. They don’t get any of that.”
“I’ve seen this happen. Tens of thousands of dollars down the toilet.” This is exactly why Ross hasn’t personally done tax auctions: “The problem with tax auctions and truly the thing that has prevented me from doing it is there is a thing called a redemption period.”
How it shows up
Know your state. Tennessee: one year. Some states: six months. Alabama: up to three. Some have no redemption. Check before you ever bid.
During redemption: secure the property (change locks, board up if needed), document the condition with photos and video, carry insurance. Don’t pour money into a rehab. You can do the absolute minimum needed to protect the asset (stop active bleeding, tarp a leaking roof) but the serious renovation waits.
After redemption expires, close up the title, clear any remaining liens, then start the rehab.
If you want to move sooner, there’s redemption hacking: track down the former owner and negotiate a quitclaim deed. Often for a small payment (a few hundred bucks, sometimes a few thousand) they’ll waive their redemption right voluntarily. “They’ll partner up with the old owners and give them the 30 grand that they would have had to pay” or cut them in on the upside. That clears the cloud and lets you work.