There are four stages of foreclosure. they are pre foreclosure stage, the auction stage, the redemption period stage and the post foreclosure stage. This article will address the redemption. In this stage the property is redeemed the original owner.

As in the previous two stages there are certain steps to follow.

1. Find properties that are going be redeemed.

2. Analyze the information to determine if there is a possibility of profit.

3. Contact the defaulting borrower.

4. Inspect the property.

5. Re-analyze based on your inspection.

6. Negotiate assignment rights with the borrower who defaulted.

7. Arrange new financing of the property.

8. Execute redemption rights and pay off the previous lender.

9. Make necessary repairs for resale.

10. Market and sell the property.

In many states the person owing the mortgage has the right to pay off the outstanding amount plus any additional charges within a given grace period. Most people who default will be unable to come up with the money required to redeem. Obviously, if they had the money there wouldn't be in this situation. Don't do anything with this property until the redemption period has passed. If you insist on marketing the property prior to the expiration of the redemption make sure you include a clause indicating it is subject to the owner not exercise his or her right of redemption.

The interesting part of this stage is that the defaulting borrower can sell or assign the redemption rights to another person.It is very similar to buying an option. An option allows a buyer the right to purchase certain property for a predetermined amount of money for a certain period of time. Like any option, if not exercised within a certain period it becomes worthless.

Most other investors may not be aware that redemption rights can be purchased and this may give you an advantage. This is a nice opportunity to purchase a controlling interest in a property for a small amount of money. Your risk is limited to the amount the borrower has agreed to accept for the redemption rights. You may elect not to exercise your option and you will only lose the amount paid for the option.

During the redemption period the homeowner continues to occupy the property. A way to reduce your exposure is to purchase redemption rights as they approach their expiration date. Of course others may have this same idea and you may lose a few deals utilizing this approach.

Learn the laws of your state and good luck!

This is only a general outline of the required steps. Research further information.

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