In Kansas, a borrower is not immediately removed from a property after the foreclosure sale. Instead, the borrower is provided a redemption period, which is a period of time that the borrower can continue to live in the home or rent the home to other parties. The purpose of the redemption period is to provide the borrower with an opportunity to pay in order to stay in the home. During this redemption period, the purchaser at the foreclosure sale does not own the home, but rather is the holder of the certificate of purchase that provides that he or she shall own the home after the end of the redemption period. When the property is abandoned, the court may extinguish redemption rights held by the borrower or in other words, order that the ownership of the property is transferred to the purchaser prior to the end of the redemption period.
Purchasing Redemption Rights
Kansas allows the borrower to transfer or sell his or her redemption rights. When this happens, the purchaser of the redemption rights steps into the shoes of the owner. In other words, the purchaser of the redemption rights can move into the property, lease the property to others, or redeem the property. In order to redeem the property, the borrower (or assigns) must pay the purchaser at the foreclosure sale, the entire amount paid, plus interest and expenses incurred by the purchaser.
In order to extinguish redemption rights held by the borrower, the purchaser must file a motion to shorten or extinguish the redemption rights with the court. The matter will then be set for a hearing. If the home is located in Johnson County, Kansas, this is a non-appearance hearing, meaning that no one needs to appear unless they object to the shortening of the rights. In other Kansas counties, the hearing is a regular hearing and the purchaser (or his or her attorney) must appear at the hearing. If no one appears or objects, the court will generally grant the request to extinguish the redemption rights.
How to Transfer Redemption Rights
Redemption rights are transferred with an assignment, similar to the transfer of a mortgage from lender to lender. With that being said, there are specific disclosures that must be given to the party transferring the redemption rights and notice must be filed with the court at the time of transfer. Therefore, it is important that an investor utilize an attorney experienced with these transaction to assist with preparing the contracts to be used in future transactions.
How to Redeem and Sell a Property
In order to redeem a property, the borrower (or party who purchased the rights from the borrower), pays the amounts owed into the courts. Moreover, this is one of the instances were many title companies can perform what is essentially a “double closing.” In other words, the person selling the property pursuant to the redemption rights is not required to have the money to redeem the property prior to selling it. Instead, following the closing of the sale, the funds paid by the end buyer are distributed directly from the title company to the court to redeem the property. Moreover, the borrower may receive money over and above the redemption price at the time of closing.
It is important that a borrower or investor seeking to sell a property pursuant to redemption rights use a title company that is experienced in these transactions as they can be more complicated than other transactions. Moreover, if the deadline for redeeming the property is missed and the sale is not closed on time, the person holding the redemption rights can no longer sell the property and may risk being in breach of the contract with the buyer. As such, you should never take chances when it comes to a redemption rights transaction.