When is it a Good Idea to Buy a Foreclosed Property in NJ?

NJ foreclosure

Since the housing market collapse of 2008, New Jersey has had the dubious distinction of leading the nation in foreclosures. For a variety of reasons (divorce, loss of income, disability, etc) people in NJ are still struggling to make their mortgage payments and stay in their homes over a decade later. Navigating the foreclosure market is wrought with pitfalls and potholes. However, contrary to popular belief that buying a foreclosure property is always bad news, there are actually a few occasions where investing in a foreclosed home can be a manageable and economical option.

 

1. You know the neighborhood.

Things happen to a house that sits vacant. Without heat and air conditioning running, a house gets exposed to moisture and rot. Without people around to fix things as they break, leaks spring up, wires fray, appliances rust. Animals bore holes in siding and chew through electrical wires. Criminals may break in and steal copper pipes and appliances, or use the property for drugs. Squatters make themselves at home and don’t clean up after themselves. These are some of the things you can expect when buying a foreclosure. But you can stem some of that tide by knowing the property and its owners.

A house in a good neighborhood is watched more carefully than a house in a neighborhood with a high crime rate. Check the local crime reports and see what the town history is. Are there police patrols in the streets that would deter criminal activity?

Neighbors would also have a vested interest in keeping up the foreclosed property for their own property values. They may occasionally mow the lawn to prevent overgrowth, weeds, and ticks. If an abandoned swimming pool was attracting mosquitoes and wildlife, they would report it to the town. Invested neighbors will do some of the work of keeping up a property for you.

 

2. You plan to tear down the house.

If the land is valuable and you plan to tear down the house anyway, buying a foreclosed property can be a great deal. You don’t have to worry about hidden repair costs if you’re ripping everything out and starting fresh. Land in New Jersey is at a premium, so if there’s acreage involved, a foreclosure may be your best option.

 

3. It’s not your primary home.

The foreclosure process can take years, and even toward the end can fall through. The legal system has protections in place to try to get the homeowner to remain in their home. They have various recourses to take up until the last day, and even then may try to regain their house. If you are trying to purchase a foreclosure as your primary residence you could be tied up for a long time without a home. It’s best to look at foreclosures when you have time to plan. Second homes or investment properties are usually a better fit.

 

4. You’re experienced in investment properties.

If you’re looking to be the next HGTV house-flipping star, it’s a bad idea to start with foreclosures. Build up a solid background of investment properties bought with traditional mortgages first. You’ll become experienced in uncovering structure issues, but usually not on the scale of what you can find in a foreclosure. As you earn stable profits, you’ll be able to afford the risk of a foreclosed property. At that point, even if you make a bad investment, it won’t bankrupt you.

 

5. You get to a property early in the process.

There’s a good chance you won’t be able to perform a home inspection if the foreclosure is being sold at auction. Without a home inspection, you will be going into the purchase totally blind. You may be able to bypass an auction altogether if you get to the homeowner during the pre-foreclosure period. The buyer may be receptive to a reasonable offer and you’ll be able to perform home inspections to uncover any potential problems.

 

6. You have an experienced real estate attorney.

An experienced attorney like George Veitengruber can help you determine if a foreclosure property is the right investment for you. Veitengruber Law can perform a title search on the property and discover if there are any outstanding liens. When you purchase a home at auction you are inheriting property liens, so you want to make sure you know what you’re getting into.

If you’ve decided that a foreclosure is a good investment for you, Veitengruber Law can also help you prepare for the auction as well as attend the auction with you. All the paperwork needs to be ready in advance including your deposit, which is nonrefundable in NJ. If you are ready to accept the risk, a foreclosed property could be your way to a big reward.

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