How to purchase a foreclosed home in NJ

If you are looking for how to purchase a foreclosed home in NJ you have come to the right place. In this new blog we will explain in depth what is necessary for this.

Buying a foreclosed property in the Garden State is often a complex process with a high potential for buyers to make costly mistakes. To avoid this, our New Jersey real estate attorney is here to help.

How To purchase A Foreclosed Home In NJ in 2023

Buying a foreclosed home can be a complex matter, as there are a variety of home types in the state of New Jersey. In addition, you also have to take into account your stages in the foreclosure process. This includes the following:

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

As we can see, there are several aspects to consider when it comes to buying a foreclosed home in New Jersey. In addition, the laws governing foreclosures in the state can vary depending on the stage of the process, the type of buyer and the location.

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

When a borrower files for bankruptcy or fails to pay their debt by the foreclosure sale date, the home will be listed for sale at court auction.

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.

Auctions on these properties require 20% deposits to be paid on the day of the auction by money order or certified check. In the event of a winning bid, you have 30 days to pay in full for the property.

Note that additional interest will be charged if you wait too long, the day interest begins to accrue varies by county. If no one bids, the bank will take possession of that property and try to sell it itself.

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 It?

The rules governing these auctions vary depending on the county where they are held. However, the first step to complete is usually to secure financing. 

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 get relevant auction details, such as the:

• Type of payment accepted.
• Minimum bid.
• Offer increases.
• Amount of the deposit.
• Auction date.
• Payment schedule.

Helpful Tips Before Buying

• 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 Foreclosed House Owned By A Bank In NJ?

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 getting as much money back as possible. Therefore, buyers should not expect to receive a huge discount for this purchase.

Where To Find Them?

Finding these properties is quite easy, you just have to search on websites like Zillow or Hubzu. However, searches using the terms “owned by lender”, “foreclosure” and “sold as is” may narrow your search.

It should be noted that there are significantly fewer of these houses compared to the other types of foreclosed houses. As a result, you may run into a fair number of competitors, making it difficult to get a good deal. 

What To Keep In Mind Before Buying Them?

Typically, after these properties are found, buyers perform the following steps:

• They send an offer.
• They request an inspection.
• Request a new jersey home appraisal.
• They negotiate the final terms of the purchase.

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

Helpful Tips Before Buying

• Work with an experienced real estate attorney or real estate agent to ensure the offer is submitted correctly.
• Make sure you have a pre-approval letter before you start. Lenders don’t waste their time with buyers undecided on their ability to pay.
• These purchases are likely to be expensive, as the banks only want to recoup their investment. Therefore, it should be considered that a large sum could be paid for this house.
• It is possible that the longer the property has been on the market, the more likely lenders are to negotiate with the buyer.

How To Buy Houses With A Pre-Foreclosure?

Lenders in New Jersey have to wait until borrowers are at least 120 days behind on their payments. During that time, lenders may provide a notice of intent to repossess the borrower.

• Since New Jersey is a judicial state, lenders have to wait 30 days before filing a lawsuit in court. On the other hand, the owner only has 35 days to respond to said demand.
• If the judge rules in favor of the lien, then New Jersey law requires the local sheriff to sell the home at auction. This auction will be within 150 days of the official foreclosure of the property.
• The time leading up to foreclosure varies substantially, as it can take 8 months from notice to sale at auction.
• The average for a 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. 

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

Working with a lawyer or real estate agent in these cases can be beneficial, as they often have access to the MLS listing before it appears on websites. For example, on Zillow.

What To Keep In Mind Before Buying It?

Oftentimes, purchases of these properties are the same as purchases of conventional houses. However, their main differences are:

• Sellers are usually very motivated to sell their property.
• Certain additional difficulties may arise if the owner decides to file for bankruptcy or pay off their debts.
• They may be doing this process under an estimated time frame.

Buyers should note that homeowners may be distraught as they are going through a rough patch. Therefore, it is advisable to consider your situation.

Helpful 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. Also, you may be able to help the buyer negotiate win-win deals.
• Should the foreclosure deadline approach, a quick closing makes the buyer’s offer that much more attractive.
• The buyer should consider including a letter in their offer explaining why the seller should help them. For example, to save your Credit Score. 
• Having a good real estate lawyer will make sure you don’t run into legal surprises in the future.

How To purchase A Foreclosed Home In NJ From HUD?

HUD foreclosed homes are similar to REO homes in that they did not sell at auction and were repossessed by the lender. Since these homes are backed by the government, the government takes possession of the property after repossession.

HUD foreclosed homes do not vary much from state to state, so the same applies to New Jersey as it does to any other state.

How Does A NJ Foreclosure Sale Work?

When a borrower falls behind on their mortgage payments, the bank can take certain steps to sell that home at a foreclosure sale. These sales occur when the bank exercises its right to sell a property at auction.

• The bank gets a lien when an individual takes out a home loan. 
• The lien protects the lender against significant losses if the borrower fails to make the agreed payment. 
• However, liens do not allow the bank to sell a foreclosed home immediately after a default on payments. In addition, lenders must comply with state and federal foreclosure laws.
• Additionally, federal law prohibits a bank from beginning foreclosure proceedings before a mortgage loan payment is 120 days past due.
• This waiting period is to help the landlord stay in their home.

How Long Do Foreclosures Take In New Jersey?

New Jersey law provides a host of legal protections, leading to one of the longest time frames for a lender to repossess your home. 

• It usually takes 2-3 years before owners are physically evicted and lose their right to the property.
• In fact, in the worst cases, this process can take many months to take effect.
• Also, with the help of a lawyer, it is possible to contest the foreclosure and buy time to pay off the mortgage.

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 purchase a foreclosed home in NJ, we will show some recommendations to make 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’s 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. This is where the seller’s minimum price will be kept private. Additionally, the seller will have the right to reject the winning offer within a period of 72 hours.
• Absolute auction. It is when a minimum price is not determined and the house 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 be free.

As is normal with any home purchase, it is important to determine your debt-to-income (DTI) ratio. Most lenders require borrowers’ monthly debts to 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 very 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 for a much lower price. It could also help the buyer find foreclosed properties that other buyers have overlooked.

5# Get Pre-Approved For A Mortgage Loan

Getting pre-approved for a mortgage is a smart move for buyers. By doing this, a lender could determine 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 vendor.

Knowing this, it is understood that short sales are easier than buying at auctions. 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 well below its market value, the seller may reject the offer.

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.