Bidding on a NJ Foreclosure Property: The Lowdown

NJ foreclosure

Buying a home at a NJ foreclosure sale (or sheriff’s sale, as they are commonly called) can be a fantastic way to score a property at below-market price. While there are some risks and pitfalls to be aware of when bidding at a foreclosure auction, if you’re well-informed, you’ll likely come out of the process happy and (hopefully) successful!

Naturally, the most obvious advantage of purchasing a home via sheriff’s sale is the low price you’re likely to pay. Foreclosure sales are a great way to gain ownership of a rental property or a home you intend to “flip.” Homes that are being auctioned at a New Jersey foreclosure sale have been through the judicial foreclosure process that our state requires, and the lender has been permitted by the court to move forward with selling via auction.

How can I find out about upcoming NJ foreclosure sales?

This is one of the best parts about buying a foreclosed property in New Jersey. Sheriff’s sales are required to be advertised for a minimum of 30 days. You can find listings of upcoming sheriff’s sales in local newspapers for each county. Many jurisdictions also have sheriff’s sale listings online on their county court website.

How does a sheriff’s sale work?

In New Jersey, foreclosure auctions are controlled or led by the sheriff’s department of the property’s county. All local county rules must be followed, however, there are several general rules that are consistent across all counties, according to NJ law.

  1. NJ foreclosure properties up for sale must be sold subject to the first mortgage held on the property. This information can usually be found within the property’s first lien.
  2. Any NJ foreclosure sale will also be subject to any/all local state or federal liens on the property.

Because of the above information, all bidders at NJ sheriff’s sales would be remiss to fail to run a complete title search on the property in question before even considering bidding. Failure to do so could land you with a property that is deeply encumbered by multiple liens, for which you will be 100% responsible.

In New Jersey, foreclosure sales usually start with the lender being given an opportunity to open the bidding. Most lenders will start with a $100 bid. Bidding on the property continues via voice auction between all of the interested parties present at the auction.

The usual course of a NJ sheriff’s sale/auction continues with bidding the price of the property higher and higher until a highest bidder remains. If you are the lucky bidder, you will be required to pay a 20% deposit of your bid price.

Upon conclusion of the bidding, the sale is considered to have ended. However, the end of the sale triggers what is known as the Redemption Period. This is a ten day period during which the original owner (who was foreclosed upon) is allowed to “redeem” the property. This can only be done if the original owner can completely pay off the foreclosure judgement amount, including any additional fees and costs (and potential liens).

At the end of the Redemption Period, if the original homeowner does not choose to redeem the home, you will be given a sheriff’s sale deed. When you receive this deed, it is expected that you will make full payment of the balance of your successful auction bid. You’ll also have to handle any fines that accrued relating to the property, after which you will be able to officially transfer the title from the former owner to yourself!

Advertisements

NJ Foreclosure Sale: What is an Arm’s Length Transaction?

When a piece of real property is scheduled for NJ foreclosure sale (also known as and commonly referred to as the Sheriff’s Sale), an interested buyer, investor or “house hunter” may reach out directly to the homeowner. Even when a homeowner’s property is in foreclosure with the Sheriff’s Sale scheduled, they (the owner) have the legal right to attempt to sell the home.

A home that is in NJ foreclosure is likely to sell at Sheriff’s Sale for substantially less than its real value. This can end with the original homeowner owing the lender the difference between how much they still owed on their mortgage loan and the foreclosure sale price. This is called a deficiency, and although lenders do not always pursue a deficiency judgement from the court, sellers should know that it is always a possibility.

Armed with information about a potential deficiency judgement, a homeowner going through the foreclosure process is smart to attempt to find a buyer before the Sheriff’s Sale date. In fact, should the homeowner find an “arm’s length” buyer prior to the foreclosure sale, it’s good news all around. The lender doesn’t have to move forward with their sale, which saves them time and money, and of course, the original homeowner may very well receive a better offer outside of a Sheriff’s Sale. Lastly, the new buyer can feel good about purchasing a foreclosure property before it is up for public sale, eliminating the competition.

What is an Arm’s Length Transaction?

When a homeowner’s lender moves forward with foreclosure, the homeowner still retains ownership and the ability to sell the property before the Sheriff’s Sale, but there are several stipulations in order to guarantee that a seller in this situation can only sell to a party who is considered an Arm’s Length buyer.

For a transaction like this to be considered fair, New Jersey real estate laws state that both the buyer and the seller must not be in any kind of relationship that is closer than “arm’s length.” The following are examples of relationships that are not arm’s length, and therefore would not be ideal buyers before the Sheriff’s Sale:

  • Family members
  • Close friends
  • Employer/employee
  • Parent company/subsidiary
  • Trust/beneficiary

As long as the homeowner is negotiating with someone who is not acting in the homeowner’s best interest (for example, a parent buying the home below market value only to allow their child, the seller, to keep living there), the end result of a transaction prior to foreclosure sale is typically a good idea.

An Arm’s Length Transaction must involve two parties who are independently acting for their own self-interest. Also, the best and fairest deal that is close to the home’s market value should ultimately be the goal of this type of transaction.

Is it Illegal to Participate in a Non-Arm’s Length Transaction?

While it is not necessarily illegal to sell to a non-arm’s length buyer, when a homeowner is already immersed in the foreclosure process, it is advisable to follow the recommendations of an experienced NJ foreclosure/real estate attorney. Ask your attorney to hook you up with a reputable tax professional as well, because transferring property to a non-arm’s length buyer comes with additional tax implications.

Learn more about your rights during foreclosure!

 

After Foreclosure: Living in a Bank-Owned Home

2986392232_c65a7272f1_z

As we make our way toward the end of the 2016 calendar year, we’re creeping up on the 10 year mark of the start of the U.S. housing crisis that began in 2007. Many states in the nation have recovered nicely by this point, with some reports saying that the housing market is the best it’s been in a decade.

In New Jersey, though, foreclosures are still a significant problem. The garden state has yet to find solid footing in the wake of the housing crisis (also called the housing bubble), and even nearly a decade later is still a state with one of the highest foreclosure rates.

Although it appeared as if things were moving in the right direction for New Jersey’s foreclosure situation this year, as we reach the end of 2016, the recovery rate has slowed to a crawl and nearly 13,000 new foreclosures entered the court system in the final quarter of this year alone. Because of the long, mandated legal foreclosure process in NJ, this new influx of foreclosures has once again caused a significant backlog in foreclosure court. We’ve taken a step backward in our recovery from the housing crisis, with Atlantic, Ocean and Essex counties  currently showing the highest numbers of new foreclosure filings.

One of the effects that the decade-long real estate recession has had on New Jersey is neighborhood blight in areas hardest hit by foreclosure. In reference to the housing market, blight is the dilapidation, deterioration or decay of certain towns and cities (or sections of those towns).

The reason for this phenomenon is that so many foreclosed homes are not being sold at auction. Since New Jersey hasn’t fully recovered from the 2007 crisis, buyers and developers are still wary about purchasing questionable properties, especially in areas that are downtrodden or showing potential signs of blight.

When a foreclosed home fails to sell at sheriff’s sale, the lender or bank retains ownership of the property. These homes are called REO: “Real Estate Owned.” Often the term “Bank owned” is used interchangeably.

REO properties are often empty for significant periods of time, which can lead to vandalism, drug activity, disrepair and squatters. All of these factors combine to create blight, especially when several or many homes in a neighborhood become bank owned and uninhabited.

Smart lenders realize the depreciation that occurs when a property becomes vacant – which means if you are at the end of your home’s foreclosure process and your home becomes bank owned (or REO) – you may be able to continue living in the home until your lender can sell it.

While not all lenders are amenable to giving former homeowners a “free ride” living mortgage free in a home that is now an REO property, some lenders acquiesce to the fact that a cared-for property is much easier to sell than one that has been destroyed by defacement and crime.

Your NJ foreclosure attorney can talk to your lender on your behalf if you are too nervous to do it on your own. If your lender is not open to letting you live in the home scot-free, there may be room to negotiate a rental agreement. Naturally, your attorney will request a monthly rent amount that you can afford. Lenders often realize that getting some money is better than getting no money at all.

If and when your lender does sell your home to another buyer, you will be given eviction notice. At that time, you’ve reached the end of the line in your REO home, and will be required by law to vacate the premises, usually within 30-60 days. So, if you are lucky enough to continue living in your home after its foreclosure sale, put away as much money as possible each month, and scout out a new living arrangement that you can afford. When the time comes, you’ll have a nest egg and hopefully your financial future will look much brighter.

Image credit: Orin Zebest

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

11705613613_f0e475d1bc_z

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

NJ Sheriff’s Sale Adjourned Twice: Am I Out of Options?

VLAWimagelarger

In the State of New Jersey, if your home is in foreclosure, that means that you’ve fallen behind on your mortgage payments and your lender plans to repossess the property.

The foreclosure timeline can be lengthy in New Jersey due to the sheer number of foreclosures bogging the system down. However, your lender’s endgame is to sell your home at what is called a Sheriff’s Sale.

A Sheriff’s Sale is essentially a public sale or auction of property that was seized or repossessed in order to satisfy unpaid debts. If you have not been paying your mortgage payment, or you are in arrears, once your home moves through the foreclosure process, it will be sold so your lender can recover at least some of the money that it was owed.

In New Jersey, foreclosures must proceed through the legal system and must follow a set of procedures so that the homeowner is never caught unaware and blindly evicted. You will have received copies of your lender’s intent to foreclose, as well as a foreclosure complaint and summons.

If the Sheriff’s Sale is approaching and you have not taken the appropriate foreclosure defense actions and you want to keep your home, New Jersey allows homeowners to request adjournment of the sale. The adjournment, or postponement, will push the date of sale out for two weeks. You can request two of these adjournments as long as you provide a good reason for doing so. There is also a small fee for each adjournment.

Once you’ve used up your two adjournments, the court is obligated to follow New Jersey state law and proceed with the sale.

While it’s great that homeowners are given the last minute option of two Sheriff’s Sale adjournments, all totaled they only give you four extra weeks to figure out how you’re going to save your home. If you can’t bring your mortgage current in that amount of time, the sale will proceed after the adjournment period and you’ll still be forced to move.

A much better way to stop a New Jersey Sheriff’s Sale from proceeding is to meet with a NJ bankruptcy attorney as soon as you are notified of the pending foreclosure and sale. Filing for bankruptcy automatically stops your lender from moving any further in the foreclosure process. You will be able to stay in your home, breathe a sigh of relief, and work with your attorney without worrying about your adjournment(s) running out.

Even if you have already exhausted both of your adjournments and the Sheriff’s Sale of your home is scheduled for tomorrow – an emergency bankruptcy petition can still be an option for you. You’ll need to apply for a credit counseling class at least 24 hours before filing an emergency bankruptcy petition.

Veitengruber Law can help you file an emergency bankruptcy petition AND sign you up for the credit counseling course that will make everything stop in its tracks, giving us the time we need to formulate the best plan of action.

Bottom line: if you’re in foreclosure in New Jersey and want to keep your home, our experienced foreclosure defense team can help, even if your home is scheduled for Sheriff’s Sale tomorrow. Call us ASAP so we can help before it really is too late. (732) 852-7295

My Sheriff’s Sale is Looming: Can I Still Save My Home?

dontpanic

Sometimes when you know you’re about to receive less-than-desirable news, it can be tempting to bury your head in the sand rather than deal with the unpleasantness at hand. As they say, “Denial isn’t just a river in Egypt,” and it can often seem like a better alternative than facing your reality.

If you’ve had recent money troubles, you may find yourself taking those ominous looking envelopes that keep arriving and tossing them directly into the trash bin, hoping that if you don’t acknowledge the problem, it doesn’t really exist. Of course, we all know that ignoring a problem will almost always make it worse, but none of us are perfect and everyone makes mistakes.

Eventually, when you’re finally ready to face the music, you will get an abrupt reality check of overdue bills, past due notices, and threatening letters from your creditors. If you haven’t been making your home loan payments, you may potentially find that your mortgage lender has filed for foreclosure. Regardless of how long you’ve been ignoring things, your first instinct may be to panic.

Don’t panic.

Even if you’re looking at a notice that says the Sheriff’s Sale for your home is scheduled to take place next month, instead of panicking, do this: Find the most qualified foreclosure defense firm in your area and describe your situation to them. Experienced legal teams can and will take on your case, even “at the last minute.”

How can I possibly save my home if the Sheriff’s Sale is only weeks away?

The right NJ foreclosure defense attorney will assure you that you still have options even when it feels like you’ve waited too long. HAMP (The Home Affordable Modification Program) is a program that was created by the federal government to help people who have found themselves struggling in a sluggish economy. The main goal of HAMP is to help homeowners like you by modifying your loan so that your monthly mortgage payment doesn’t exceed 31% of your gross income. For those people who’ve been impacted by financial hardships, this can often be enough to take the air out of an impending foreclosure.

Working with a strong legal team who is trained and experienced in dealing with difficult and/or unusual circumstances surrounding foreclosures is the key to your success this late in the game. A proven track record of successful ‘late date’ loan modifications is what you should look for in a NJ foreclosure defense lawyer. An attorney with the right expertise is likely to be able to save you from eviction, and may even be able to negotiate lower monthly payments than you had been making previously.

Ignoring your bills is definitely not recommended. The good news, though, is that even if you had your head stuck in the sand for quite awhile, you’ve now plucked it out and are taking the bull by the horns. No matter what has transpired in the past, you are doing the right thing by trying to improve your situation and asking for help.

Image credit: Jim Linwood