What is the best way to write a realistic villain redemptive arc?
Assuming you are not writing a satire, or comedic piece, here is the main piece of advice I would have:
Do not hit the "reset" button on people's emotions.
Your villain him/herself will likely have to cope with significant psychological fallout from whatever has occurred--be it possession, bad decisions, addictions, or anything else that may be involved. Your story will feel more realistic if you deal with the consequences rather than handwaving them or shying away from them.
Even if a sudden conversion is involved--and I often point to Saul/Paul of Tarsus in the Bible as a key example of this--you should expect to see
some fallout still, both in the individual him/herself, and those around them. If you have ever read the book of Acts, even though it's covered very briefly in a few sentences, notice that initially the repentant Saul was greeted with suspicion by the people he had once persecuted...and this even after Ananias' vision telling him that Saul was now safe.
The traumas that the villain has experienced, and that he or she has caused, do not simply vanish overnight. Conflicted feelings are to be expected in such a situation. How that person, and those around them, deal with those feelings as well as with any lingering issues your former villain may still have (be they material issues or inner, psychological ones such as bad habits, behavior patterns, or addictions) is likely to be a driving force in your plot.
The road to redemption is not an easy one. Proper motivation is required, crimes cannot be erased and justice may still need to be served, and even if
physically repaired, the emotional damage is not as easily so. So make sure to pay attention to all of the consequences--not just the fact that your repentant villain has laid down his or her arms, but the unpleasant things that will have to be faced as well.
I definitely don't want to tell you
how you should do it. Believable conversions can come as slow disillusionment or as sudden moments where the villain realizes his life has blown apart at the seams and he
must make a choice. And the degree of suspicion and hostility can vary. But don't ignore the consequences. Don't ignore the fact that the damage still exists--that the crimes were still done, and that people will still have their feelings about that. How or if you choose to repair those consequences is up to you (and there are plot benefits either way), but the last thing you want to do is pretend they're not there.