My Landlord’s in Foreclosure – Can I Buy the Home?

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As we’ve previously discussed, New Jersey renters have significant rights if and when their landlord falls behind on making the mortgage payment and ends up in foreclosure. There are strict rules in place to prevent landlords from illegally evicting tenants in situations where the property has been sold at foreclosure auction and the new owners wish to live in the home.

Landlords are legally bound to give their tenants at least 90 days’ notice if the property will be changing ownership and the buyer doesn’t wish to rent the home out to tenants. This 90 days rule will be extended if the renters have a lease that goes beyond the 90 day timeline.

As a renter in this situation, you may very well decide to simply find a different place to live. That is certainly a viable option that works for many people. Additionally, it’s possible that the home’s new owners bought the property fully intending to continue renting it out. In that case, you can continue living in the home – the only change being who you pay each month for rent.

A slightly more difficult resolution to the problem of a landlord in foreclosure involves you (the renter) making an offer to purchase the home. If you discover that the home you’re living in will be sold at foreclosure auction (NJ Sheriff’s Sale), you may actually be able to buy the home yourself.

If you are financially stable with a good credit score, and owning your own home is something you desire, connect with a local NJ attorney who has experience in the foreclosure arena. He will be able to walk you through what you’ll need to do in order to purchase the home.

It is important to keep in mind that the mortgage company or lender has foreclosed on the current owner (your landlord) because the mortgage is currently in default. To be approved to essentially take over the property title, you’ll have to bring the default amount current, which means you’ll need to pay the money that your landlord failed to pay.

The mortgage company’s main goal is to recover as much money as possible, and if you offer them a satisfactory purchase price – this option is a real possibility. It’s not a slam-dunk, and it will require some negotiation between your real estate attorney and the lender, which may take some time; however, if there is a Sheriff’s Sale scheduled, your attorney may be able to have the sale postponed so that your sale can proceed.

This type of transaction often qualifies as a Short Sale, because you likely won’t have to pay the full value of the home. The only other alternative for the lender to recover any money on the home is to sell it at foreclosure sale, which would bring in a much lower dollar amount. However, you must realize that if you really want to own the home, you shouldn’t low-ball the lender, and be open to negotiating if the lender doesn’t approve your first offer.

It is important to work with a New Jersey real estate attorney on matters like this. To go it alone would mean probable failure. For more information on complex real estate transactions in New Jersey, continue reading here.

Image credit: Mark Moz

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