How to purchase a foreclosed home in NJ

Choosing to purchase or invest in a foreclosed home in NJ can work as an alternative that provides valuable opportunities. This is because foreclosures typically have good investment potential.

In a foreclosure, homes are often sold at a price below market value. However, it is key to know how to buy them, as it is a complicated process. 

Therefore, it is important to have the help of a well-versed NJ foreclosure defense attorney like our expert Carolina Theresa Curbelo.

How To purchase A Foreclosed Home In NJ In 2024

Buying a foreclosed property can be a complex issue, as there are many types of houses in the state of New Jersey. 

• Properties that are sold at auction. These are homes that have been publicly advertised for at least 4 weeks and auctioned by a third-party trustee.
• Bank property foreclosures (REO). Houses that are not sold at auction become the properties of the lending bank. As a result, they are listed on the open market with REO real estate agents.
• Properties in pre-foreclosures. These are all properties that have been previously informed of the intention to foreclose. They are generally listed on the open market to avoid an actual foreclosure.
• HUD Homes. The Department of Housing and Urban Development (HUD) sells properties with FHA Insured Mortgage Development Institute (FHA) foreclosures through online auctions.

As you can see, there are several aspects to consider when trying to purchase a foreclosed home in NJ. Additionally, the laws governing foreclosures in the state can vary depending on the stage of the process, type of buyer, and location.

What Is The Foreclosure Market Like In New Jersey?

In recent years, New Jersey has had a high foreclosure rate with thousands of applications. In fact, the counties with the highest rates have been: 

• Burlington, 
• Cumberland, 
• Gloucester, 
• Camden, and 
• Ocean. 

Despite the challenges, opportunities for purchasing and investment are still present. However, buyers are advised to visit properties prior to foreclosure to avoid risks associated with auctions.

How Do You Purchase A Foreclosed Home At Auction In NJ?

A home may be placed at auction for sale if the borrower: 

• Files for bankruptcy, or
• Does not pay the debt before the date of the foreclosure sale.

These auctions are held by a county sheriff at the courthouse or other government property. Prior to these sales, auctions are posted on:

• Local newspapers.
• Websites like RealtyTrac and Zillow.
• County sheriff websites. For example, Ocean County or Camden County.

Auction Property Purchasing Process

Auctions of these properties require 20% deposits to be paid on the day of the auction with a money order or certified check. 

If a winning bid is submitted, you have 30 days to pay in full for the property. But additional interest may be charged if you wait too long. Still, the day on which interest begins to accrue varies by state.

If no one makes an offer, the bank or government will take possession of that property and try to sell it themselves.

Where To Find Them?

All New Jersey foreclosed home auctions must be advertised for at least 4 weeks in a local newspaper. This can be done online at njpublicnotices.com.

Other sites where these auctions are also often placed are Hubzu and Auction.

What To Keep In Mind Before Buying?

Since auctions require cash to purchase, the buyer must have the funds in their personal accounts or obtain them from a lender. In some cases, it can also be achieved through:

1. A business partner, or
2. A private investor.

Once the funds are ready, the buyer can contact the sheriff to obtain relevant auction details, such as:

• The type of payment accepted.
• The minimum bid.
• Bid increments.
• The deposit amount.
• The auction date.
• The payment schedule.

Helpful Tips Before Buying A Foreclosed Home At Auction

• Try to inspect the property. Contact the trustee ahead of time, they may agree to perform a New Jersey home inspection. However, all auctions are to sell a house as is in New Jersey. 
• Decide on a maximum offer. It is essential to decide the maximum amount you are willing to pay before bidding begins. This is so that emotions do not mislead the buyer into paying more than necessary.
• Ask a lawyer to check the title. Verifying real estate title early will help you avoid problems with title transfers. It is also advisable to purchase title insurance in New Jersey.
• Inspect if there are tenants in the property. Investors have to abide by the lease from the previous owner. Additionally, landlords must allow tenants 90 days to vacate the property.
• Keep repairs in mind. Most of these houses have been abandoned or unoccupied for a considerable period of time. Therefore, you must budget for your possible repairs.

Homeowners in New Jersey can file for bankruptcy, giving them an opportunity to participate in a payment plan. Generally, this plan is usually between 36 and 60 months.

During this time, homeowners can pay off their debts and redeem their homes. This may be done at any time prior to the auction, causing the auction to be postponed or cancelled. 

How To Buy A Bank-Owned Foreclosed Home In NJ?

When a house doesn’t sell at auction, the lenders take possession and attempts to sell it by themselves. This process is known in English as ”REO”.

The process for buying a bank-owned or REO-owned home is similar to buying a conventional house in New Jersey. The only difference is that you are buying directly from a bank rather than from an individual.

Although it is possible to get a good deal on these purchases, the bank is only interested in recovering as much money as possible. Therefore, buyers should not expect to receive a large discount for this purchase.

Where To Find Them?

Finding these properties on sites like Zillow or Hubzu is pretty easy. However, searches using the terms “owned by lender”, “foreclosure” and “sold as is” may narrow your search.

There are also significantly fewer of these homes compared to the other types of foreclosed homes. As a result, you may encounter a good number of competitors, which will make it difficult to get a good deal. 

What To Keep In Mind Before Buying?

After finding one of these properties, buyers usually take the following steps:

1. Send an offer.
2. Request an inspection.
3. Request a New Jersey home appraisal.
4. Negotiate the final terms of the purchase.

If the property meets the lender’s requirements for condition and lien status, conventional financing is permitted.

Useful Tips Before Buying

• Work with an experienced NJ real estate attorney or real estate agents to ensure the offer is submitted correctly.
• Make sure you have a pre-approval letter before you start the process of purchasing an REO foreclosed home. Lenders don’t waste their time on buyers who are hesitant to pay.
• Be aware that you could pay a large sum for the house as they are expensive properties where banks only want to recover their investment.
• It is possible that the longer the property has spent on the market, the more likely lenders are to negotiate with the buyer.

How To Buy Houses With A Pre-Foreclosure?

Pre-foreclosures are properties whose owners have been informed of the intention to foreclose. Usually due to late mortgage and/or tax payments.

Lenders in New Jersey have to wait until borrowers are at least 120 days late on their payments. At that point, lenders can deliver an Intent to foreclose notice to the borrower.

• Since New Jersey is a judicial state, lenders have to wait 30 days before filing a lawsuit in court. The owner only has 35 days to respond to said demand.
• If the judge rules in favor of foreclosure, the law requires the sheriff to sell the home at auction within 150 days of officially foreclosing on the home.
• The time before foreclosure varies substantially, as it can take 8 months from the notice to the sale at auction.
• The average for a pre-foreclosure to complete its process is usually more than 3 years in New Jersey.

Where To Find These Houses?

Generally, if a borrower can’t afford their property, one option they have is to put it on the real estate market and sell it before the actual foreclosure. 

If this case arises, you could list on the MLS with an agent and market this property as another home for sale.

Working with an attorney or real estate agent in these cases can be beneficial, as they often have access to the MLS listing before it appears on sites like Zillow.

What To Keep In Mind Before Buying It?

Although the process is often the same as purchasing conventional homes, it differs in some aspects:

• The seller is usually very motivated to sell their property.
• Certain additional difficulties may arise if the owners decide to file for bankruptcy or pay off their debts.
• They may be performing this process under an estimated time frame.

Buyers should be aware that owners may be distressed as they are going through a rough patch. Therefore, it is advisable to consider their scenario.

Useful Tips When Buying These Properties

• Sellers are losing their house, so be compassionate.
• It is essential to work with an experienced agent to locate good properties. Additionally, it may help the buyer negotiate mutually beneficial deals.
• If the foreclosure deadline approaches, a quick closing makes the buyer’s offer much more attractive.
• The buyer should consider including a letter in their offer explaining why the seller should help them. 
• Having a good real estate attorney will ensure that you do not encounter legal surprises in the future.

Our attorney Carolina T. Curbelo has helped dozens of buyers in these scenarios. Do not hesitate to contact us as this does not obligate you to anything and can help you a lot in your process.

How To Purchase A Foreclosed Home In NJ From HUD?

HUD foreclosed homes are similar to REO foreclosed homes in that they were not sold at auction and were repossessed by the lender. 

Because these homes are backed by the government, the government takes possession of the property after foreclosure.

HUD foreclosed homes don’t vary much between states, so the same will apply for New Jersey as it does for any other state.

Where To Buy A Foreclosed Home In NJ From HUD?

To locate HUD properties, check the HUD Home Store website. You must use a registered agent to submit offers to HUD, so be sure to confirm your agent’s approval.

What To Take Into Account Before Buying It?

HUD focuses solely on price, evaluating offers on an ongoing basis and accepting the highest offer at the end of the day that meets the minimum purchase price established for that property.

Helpful Tips When Buying These Properties

Initially, HUD properties are exclusively available to buyers who plan to live in them. But it must be before offers are opened to investors. 

This makes it a favorable option for residential buyers looking for affordable homes. On the other hand, the properties that reach investor bids are usually those that require repairs.

How Does A Foreclosure Sale Work In NJ?

• After obtaining a final judgment, the plaintiff delivers a writ of execution to the county sheriff. This will be to schedule and carry out the sale of the property. 
• In residential foreclosures, the sale date of a home is advertised in a local newspaper for 4 consecutive weeks. 
• The owner is notified of the sale date and can request up to 2 2-week postponements. 
• After this period, the sale can only be postponed with the consent of the plaintiff, an order of the Court of Chancery, or the filing of a bankruptcy case.

It should be noted that in New Jersey, an owner has the option (within 10 days of the sale) to repossess the property. To do this, he must pay the full amount of the foreclosure judgment along with the costs of the sale. 

This is not usually easy, so it is essential to have a good lawyer.

How Long Do Foreclosures Take In New Jersey In 2024?

The length of a foreclosure in New Jersey varies depending on factors such as the type of property and the circumstances of the case. 

• Typically, the lender begins the foreclosure process between 60 and 90 days after you default. 
• Afterwards, it may take 6 to 12 months to complete the procedure and sell the property. 

Although legal delays and negotiations may affect this schedule. Some foreclosures are resolved quickly, while others can take more than a year in New Jersey.

We invite you to learn what not to do when applying for a mortgage in this state. Even if you are a self-employed worker and are looking for self-employed mortgage loans.

Recommendations On How To purchase A Foreclosed Home In NJ

Now that we have explained how to buy a foreclosed house in NJ, we will give you some recommendations for making these purchases.

1# Research The Different Methods To Buy A Foreclosed House

The first step before buying a foreclosed home is research. In New Jersey there are 3 categories of property auctions, these are:

• Minimum bid auction. Known as a “reserve price,” it is an auction where a bidder must meet a minimum price for the home to sell. Once the minimum price is reached, the highest bidder will win.
• Reserve auction. It is where the seller’s minimum price will be kept private. Additionally, the seller will have the right to reject the winning bid within a period of 72 hours.
• Absolute auction. It is when a minimum price is not determined and the home is sold to the highest bidder. The seller will have to accept the result of the auction.

2# Determine The Budget That You Have To Pay For The House

Budgeting is important before you purchase a foreclosed home in NJ. Although in some cases it is possible to get it at a lower price, no house will come for free.

As is normal with any home purchase, it is important to determine your debt-to-income (DTI) ratio. Most lenders require that borrowers’ monthly debts be no more than 43% of their gross monthly income.

3# Carry Out An Inspection

Inspections are important. Therefore, it is worth investing in a home inspector or surveyor to save yourself thousands of dollars in the future. 

This is really important, since generally these houses have not been occupied for a considerable period of time.

4# Hire An Experienced Real Estate Professional

Foreclosed property experts often have access to multiple local services and will know the local market.

These experts help buyers know when one of these foreclosed homes is being offered at a much lower price. Additionally, it could also help the buyer find foreclosed properties that other buyers have overlooked.

5# Getting Pre-Approved For A Home Loan

Getting pre-approved for a mortgage is a smart move for buyers. By doing this, a lender could determine up to how much money they could lend you.

6# Consider Short Sales Instead Of Buying At Auction

There are two ways to buy a foreclosed home in New Jersey:

1. From an auction, or
2. Buy it in person from a seller.

Knowing this, it is understood that short sales are simpler than auction purchases. Therefore, negotiating directly with the owner may result in a much better price.

7# Make A Competitive Purchase Offer

If the home is in foreclosure, the buyer’s real estate agent must present the offer to the individual who currently owns that home. 

During these scenarios, the buyer may be tempted to make a low offer on the foreclosed home. However, if an offer is made far below its market value, the seller could reject the offer.

Frequently Asked Questions on how to purchase A Foreclosed Home In NJ

How Can Our Experts At Curbelo Law Help You?

For homebuyers who have dreamed of buying a new home, but are on a tight budget, buying a foreclosed home may be your best option. 

• In some cases, it is possible to get foreclosed homes at less than market value.
• However, for this, you need to have our real estate experts on the subject. Attorney Carolina T. Curbelo has more than 10 years of experience in these real estate matters.
• Therefore, it is essential not to rush before making a decision. It is best to work with a professional who can explain the advantages and disadvantages of buying a foreclosed property.

Have you already started looking for a foreclosed home? If you are not sure whether to proceed with this purchase, please do not proceed on your own. Call us immediately, send us an E-mail or if you prefer, schedule an appointment with our office in Ridgewood, New Jersey.