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A “redemption premium” is the extra amount, on top of repaying the purchase price and costs, that a former owner must pay to reclaim a property under the right of redemption after a tax sale. It’s essentially the markup that makes redemption work the way it does, and understanding it explains why redeeming is so costly.
In Texas, the premium is set by law and depends on timing and property type. For a residence homestead or agricultural-use land, redeeming in the first year generally requires a premium of twenty-five percent, and redeeming in the second year a premium of fifty percent, added to the amount the buyer paid plus taxes and costs. For most other property, the premium may be up to twenty-five percent within the shorter redemption window. So redeeming a homestead in the second year, for example, means paying back the buyer’s costs plus an additional fifty percent.
The premium exists for a reason. It compensates the tax sale purchaser for their investment and risk during the period when the former owner can still take the property back. Without it, no one would have an incentive to bid at tax sales, since their purchase could simply be reversed. The premium is the tradeoff that makes the redemption right possible while still allowing a functioning tax sale system.
For an owner, though, the premium is exactly what makes redemption a painful option. You’re not just buying back your property; you’re buying it back at a substantial markup, on a deadline. For heirs already stretched by the original tax bill, that premium often puts redemption out of reach. It’s one more reason the smartest moves happen before a tax sale, when a property can still be dealt with on normal terms rather than at a redemption premium afterward.
A couple of quick questions:
How much is the redemption premium? Generally twenty-five percent in the first year or fifty percent in the second for homestead or agricultural property, and up to twenty-five percent for most other property within its shorter window, added on top of the buyer’s costs.
Why is there a premium at all? It compensates the tax sale buyer for their investment and risk during the redemption period. Without it, there would be little incentive to purchase at tax sales.
If you’re looking to remove yourself from a lawsuit and get paid for your interest, no cost to you, call or text us at (469) 708-8003 for an offer today.
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