Understanding Deeds in Alabama Foreclosure Sales: What Buyers Need to Know

By Meredith Amon, Licensed in Alabama and Florida

If you’re thinking about purchasing a foreclosed property through a bank in Orange Beach or anywhere along Alabama’s Gulf Coast, it’s important to go beyond price and location and focus on one of the most critical elements of the transaction: the type of deed you'll receive at closing.

In Alabama, bank-owned properties (often referred to as REO—Real Estate Owned) come with their own unique set of legal considerations. One of the most important? The type of deed used to convey ownership—and how it affects your rights, your risk, and your plans, especially if you want to build or renovate quickly.

Types of Deeds Used in Alabama Foreclosure Sales

When a property is purchased through a bank after foreclosure, it is most commonly transferred using a Special Warranty Deed. Less frequently, a Quitclaim Deed may be used, depending on how the property was foreclosed on and the bank's internal policies.

Here’s a breakdown of what each deed means—and how it plays into the risks of Alabama’s right of redemption laws.

Special Warranty Deed (Most Common in Foreclosures)

What It Is
A Special Warranty Deed guarantees that the grantor (in this case, the bank) has not caused any title defects during the time they owned the property—but makes no promises about the title prior to foreclosure.

Pros

Standard in REO sales
Generally accepted by most title insurance companies
May allow limited financing and resale after purchase

Cons

Does not cover pre-foreclosure title issues
Does not eliminate Alabama’s right of redemption, which may still apply to the transaction
Buyer is responsible for conducting due diligence regarding liens, encumbrances, or redemption risks

Quitclaim Deed (Occasional Use)

What It Is
A Quitclaim Deed conveys only the interest the grantor may have, with no warranties or guarantees—not even that the grantor owns the property free and clear.

Pros

Simple and fast
May be used when the bank’s title interest is unclear or unresolved

Cons

No assurance of clear title
May not be insurable, which can block financing or resale
Adds complexity if you plan to build, borrow, or develop the property
High-risk if the redemption period is still active

Alabama’s Right of Redemption: How It Affects Foreclosure Sales

In Alabama, even after a foreclosure sale has occurred, the former owner may still have legal grounds to reclaim the property under the statutory right of redemption.

Timeframes:

One year for non-homestead properties (which includes most vacant land or investment homes)
180 days (six months) for homestead properties, if foreclosed by a regulated lender

Redemption Requirements:

To reclaim the property, the former owner must:

Repay the full foreclosure sale price
Cover interest (up to 12%), property taxes, insurance, and improvement costs
Do so within the applicable timeframe

This means that even after you’ve closed on the property, the prior owner can force you to give it up, as long as they reimburse all allowable expenses. That’s a serious risk—especially for buyers planning to build or remodel immediately.

Mitigating Risk with a Redemption Bond

Some buyers explore the option of obtaining a Redemption Bond, which is a surety product designed to protect against losses if a former owner redeems the property.

What It Does:

Provides protection for the title company or lender, not the buyer directly
Allows the issuance of title insurance
May enable a buyer to secure construction financing or move forward with improvements

Who Sells It:

Surety bond companies (often through national underwriters)
Sometimes arranged via your closing attorney or title insurer
Local insurance brokers experienced in real estate transactions

Cost:

Typically ranges from 1% to 3% of the bond amount, depending on the property value, risk, and duration of the bond

Keep in mind: The bond does not prevent the redemption—it simply protects the insured party if redemption occurs. You may still have to vacate the property or halt your project.

Final Thoughts

When purchasing a foreclosure property from a bank in Alabama, it’s essential to understand that:

You’ll likely receive a Special Warranty Deed, not a General Warranty Deed
You may face a statutory redemption period, during which the former owner can reclaim the property
You may not be able to build, finance, or insure improvements without a Redemption Bond
There are often title complexities, especially if a Quitclaim Deed is used

Before you commit to a purchase, especially one involving vacant land or plans for new construction, consult with a qualified real estate attorney, title company, and surety provider to fully evaluate the risks and protections available to you.

To browse bank-owned and foreclosure listings along the Alabama Gulf Coast—and to learn more about deed types, title concerns, and redemption protections—visit www.searchthegulf.com. I’m here to help you navigate every layer of the process.

#searchthegulf #meredithamon #becausewelivehere

SEARCH ORANGE BEACH REAL ESTATE LISTINGS FOR SALE

Sort by:

$16,500,000

4224 Orange Beach Boulevard, Orange Beach

0 Beds 0 Baths 0 SqFt Land MLS® # 376173

Gulf States RE Service

$10,500,000

↓ $400,000

29170 Canal Road, Orange Beach

7 Beds 10 Baths 8,964 SqFt Residential MLS® # 378844

Engel and Volkers Gulf Shores

$9,849,000

↓ $900,000

28750 Canal Road, Orange Beach

5 Beds 9 Baths 7,187 SqFt Residential MLS® # 363736

Signature Properties

$5,350,000

26618 Perdido Beach Boulevard Unit 2, Orange Beach

6 Beds 8 Baths 4,450 SqFt Residential MLS® # 377332

Vicki Lynn Real Estate

$5,300,000

31292 River Road, Orange Beach

6 Beds 7 Baths 4,718 SqFt Residential MLS® # 360051

Signature Properties

$4,850,000

23150 Perdido Beach Boulevard, Orange Beach

5 Beds 6 Baths 3,488 SqFt Residential MLS® # 378523

RE/MAX Paradise

$4,850,000

23150 Perdido Beach Boulevard Unit 2, Orange Beach

10 Beds 10 Baths 5,278 SqFt Residential MLS® # 377811

RE/MAX of Orange Beach PHONE: 334-654-0750

$4,800,000

30510 River Road, Orange Beach

4 Beds 5 Baths 6,000 SqFt Residential MLS® # 367056

C Properties Sales & Managemen PHONE: 251-979-6011

$4,750,000

26350 Perdido Beach Boulevard Unit C2902, Orange Beach

4 Beds 5 Baths 4,756 SqFt Residential MLS® # 373609

Caribe Realty, Inc. PHONE: 251-747-1232

$4,750,000

25122 Perdido Beach Boulevard, Orange Beach

0 Beds 0 Baths 0 SqFt Land MLS® # 363696

Lewis & Co. Real Estate

$4,495,000

29727 Hayden Drive, Orange Beach

5 Beds 5 Baths 4,008 SqFt Residential MLS® # 378168

Joseph Carter Realty Main

$4,495,000

↓ $5,000

24678 Cross Lane, Orange Beach

6 Beds 8 Baths 3,426 SqFt Residential MLS® # 373259

Century 21 J Carter & Company CELL: 251-979-9781

1 2 3 4 76

Search Coastal Alabama Homes and Real Estate For Sale

Sort by:

$20,000,000

Kennedy Road, Bon Secour

0 Beds 0 Baths 0 SqFt Land MLS® # 376378

Alabama Beach Realty LLC PHONE: 251-752-4224

$16,500,000

901 Waterway West Boulevard, Gulf Shores

0 Beds 0 Baths 0 SqFt Land MLS® # 369630

RE/MAX Paradise

$16,500,000

4224 Orange Beach Boulevard, Orange Beach

0 Beds 0 Baths 0 SqFt Land MLS® # 376173

Gulf States RE Service