Tax Sale Buyers Beware: Your property could be Redeemed

Sure, one of the best deals in distressed real estate is to buy property at a county tax sale, where you can purchase a property–basically–at an opening bid that is generally the past due taxes.

But, that strategy has a number of down-sides. The biggest is the taxpayer / property owner’s ability to “redeem” the real property by coming back and paying the debt.

This redemption period is defined at Tenn. Code Ann. § 67-5-2701 and, generally, lasts a year.  And, trust me, if you’ve paid money for a distressed property that’s gone to a tax sale, you probably don’t want to wait an entire year to do anything with the property, especially where the property is abandoned or in disrepair.

Well, the Tennessee Legislature has some good news for you. In legislation sponsored by John Stevens in 2019, there are some changes to the redemption law that allows a shorter redemption period based on the number of years a property has been delinquent.

This is quickly summarized as follows:

Years of Delinquency Redemption Period
5 years or less 1 year
5-7 years 180 days
8 years or more 90 days
Vacant and abandoned* 30 days

*To be considered vacant and abandoned, a property must be inspected at least three times over a two-month period at different times of day, see Tenn. Code Ann. § 67-5-2701 (a)(2).

Properties purchased in a tax sale may be redeemed by the previous owner, the heirs of the previous owner, or lien holders and assignees. An order confirming the tax sale is entered into the court records within 45 business days of the sale date. Once the order is complete, the property is eligible for redemption. If the IRS holds a lien on the property, the right of redemption is 120 days from the date of the sale (28 U.S.C. §2410(b)).

Right of redemption for real estate sold under a deed of trust or mortgage, unless the right of redemption is expressly waived, remains the same at two (2) years after such sale (T.C.A. §66-8-101).

Author: David

I am a creditors rights attorney with Bone McAllester Norton PLLC in Nashville, Tennessee.

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