Buying a foreclosure in NJ is a complex process with the potential for buyers to make costly mistakes. It is most important to understand the foreclosure process in order to avoid mistakes that can either derail your foreclosure purchase or cost you additional money.
If a homeowner falls behind on payments the house will fall into pre-foreclosure. The lender will file a notice of default to begin the foreclosure process. During this phase, the homeowner is granted a certain amount of time to catch up on past due mortgage payments and acquired fees.
This is also the opportunity when the property may be sold as a “short sale” by the homeowner. A short sale is when a property is sold at a lower price than the homeowner owes on the mortgage and the mortgage lender agrees to a lower payoff amount on the property thereby avoiding the time, expense and derogatory credit associated with foreclosure litigation.
3 Points for Consideration Regarding Foreclosed Properties
- Foreclosures are complex transactions.
If you are purchasing a foreclosure, you should consult with a real estate agent with a foreclosure background as well as a real estate attorney well-versed in the foreclosure process. - Every state has its own set of foreclosure laws.
Buyers need to understand that foreclosure laws vary from state to state. It is imperative to get qualified legal advice from a local real estate attorney who is familiar with the foreclosure laws in their state - Buying foreclosure properties is an “as is” transaction.
When negotiating a price on a foreclosed home, buyers must adjust for the repair costs and any additional unforeseen repairs.
Other Key Components Regarding Foreclosed Homes in NJ
In New Jersey, homeowners have a right to redeem their property after the foreclosure within ten days after the sale and up until a court confirms that sale. There are also other complex legal avenues a homeowner can take to redeem their property so it is important to work with a qualified real estate attorney who is well-versed on these issues.
Note: Homeowners would have to pay a significant amount of money to redeem the property so redemption does not happen too often.
Before Making an Offer on a Foreclosed Property Consider the Following Hidden Hazards:
- Research how long the foreclosure was vacant. Homes in a dire state of disrepair won’t be eligible for a conventional mortgage. Some foreclosures could potentially be destroyed either by the homeowner or due to vacancy and vandalism.
- Hire a home inspector to thoroughly check out the foreclosed home for major problems so you can be provided with an estimate of how much money it will cost to make repairs. Poor Maintenance – If homeowners were unable to afford their mortgage payment or were forced to leave, they almost certainly were unable to perform routine maintenance or chose not to maintain the property. No Disclosure – There is no obligation to disclose the problems or issues with the property, so it is of critical importance to have the home inspected by a qualified professional. However, you may have to buy the property without the opportunity to inspect it.
- It is imperative to hire a professional to conduct a title search. Unless properly discharged during the foreclosure process, debts, judgments or liens stick with the property making the new owner responsible for repayment.
- Properties purchased at foreclosure auction require a twenty percent deposit the day of the auction in the form of a certified check or money order and must be paid in full within 30 days of the sale.
Your safest bet is to speak with a real estate lawyer who can best instruct you on the process and guide you through all the steps required to successfully buy foreclosure properties in NJ.