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The listing broker’s offer of compensation is made only to participants of the MLS where the listing is filed. There are several ways buyers can purchase homes when owners fall behind on mortgage payments. Walking through two bank-owned homes in Harrison Township recently, Realtor Nancy Kowalik pointed out the highs of lows of buying foreclosed properties. The length of the foreclosure process will vary depending on location. In New Jersey specifically, pre-foreclosure can only be initiated when the property owner is 4 months behind on their loan repayments. A pre-foreclosure is an earlier stage of the foreclosure process.
Properties that do not sell at auction revert back to the bank. Pre-foreclosures are typically listed in county and city courthouse buildings. In addition, many online resources, including Foreclosure.com, list properties that are in the pre-foreclosure phase. In local multiple listing services, the foreclosure status of a property may not be highlighted; the fact may only be stated in the property description.
Sheriff's Sale Auctions
A bank may take several months to respond to a short-sale offer, so the process can take considerably longer than a traditional purchase. In a short sale, a lender is willing to accept less for a property than the amount that is owed on its mortgage. Borrowers do not necessarily need to be in default for a lender to agree to a short sale. However, they typically need to prove some type of financial hardship that is likely to result in default, such as the loss of a job. Lenders increasingly are selling seized assets through real estate agents, so don’t hesitate to ask a real estate broker or agent for opportunities.
However, buying foreclosures can be significantly more complicated than conventional homes. It’s imperative that you learn about the process and work with a team of professionals if you’re just getting started. With the trajectory of New Jersey’s real estate market, this is the time to invest in property, especially if you can find a good deal on a foreclosed house. Depending on the type of housing auction you go to, you may or may not be able to carry out your own inspection of the home before buying. It’s worth asking the auction event manager if you can view the property pre-purchase. Absolute auction – This is where no minimum price is set and the property is sold to the highest bidder.
Foreclosure auction: Best for more experienced buyers
Find a real estate agent who has experience with foreclosure purchases. Auction listings often state that the home is offered for sale as-is with no contingencies. County-owned foreclosures are properties that the county tax collector has seized because the owner didn’t pay property taxes.
Once you assemble all of the relevant documents to apply for pre-approval, keep them handy, even once you have your letter in hand. Most letters expire after days, and because foreclosures can take a while, if you want to you keep your house hunt active, you may need to reapply. It all begins when the owner misses their loan payments for three to six months. The lender can then file a public notice of default, which starts the pre-foreclosure process. An agent can help you determine a good price to offer on the house, especially if you can find a contractor to estimate repair costs for you.
Buying New Jersey pre-foreclosures
While foreclosure rates have plummeted, some homes are available in virtually every real estate market in the U.S., providing opportunities for homeowners and investors alike. HUD homes are perfect if you plan to finance your purchase with a government-funded loan, such as FHA, VA, or USDA loans. They’re not a great option for investors, as HUD gives a 30-day priority to everyday home buyers before opening the listing to all.
Pre-foreclosures start when the lender files a default notice on the property, informing the owner that foreclosure will be pursued if they cannot repay their debt. HUD homes are like REOs in the sense that they didn't sell at auction and were repossessed by a lender. But, since HUD home mortgages were backed by the government, the government takes possession after foreclosure instead of a bank. If a borrower can't catch up on their payments, one option is for them to list their property on the marketplace and sell before an actual foreclosure. In this case, they could list on the MLS with an agent and market the property just like any other home for sale, albeit under more motivated circumstances.
Is Now a Good Time to Buy a Foreclosed Home?
Once someone reaches the minimum price, the highest bidder wins. What’s more, NJ real estate investors have plenty of inventory to choose from, thanks to the fact the state has thehighest foreclosure ratein the country. So buying a foreclosure at auction in NJ can be a great way to enter this lucrative and fast growing market. With all this being said, foreclosed homes can wind up being incredible deals.
An experienced, specialized realtor can help you decide if a foreclosed home is a good bargain. Kowalik did the walkthrough herself and found that a pipe had burst and the home now sported a makeshift waterfall in the garage. Kowalik and her clients spoke to the bank and made arrangements for the repairs prior to closing. "I've dealt with people who went into this kind of thing thinking they would really make some money," Jordan said. Contracting knowledge is important for anyone eyeing a foreclosure, as is money and business savvy. He described a young couple with a child who purchased a foreclosure not knowing that the property had been inhabited by squatters who cooked meth in the basement.
If you’re buying a foreclosure at an auction, the highest bidder wins. Many auctions will also require the winner to pay cash up front, either the entire amount upfront or a percentage. Before participating in an auction, do plenty of research and try to sit in on a few.
Unfortunately, there are significantly fewer REOs available than pre-foreclosures, auctioned properties, and conventional homes. This means any properties worth buying will probably involve a fair amount of competition, making it harder to get a great deal. Sometimes, websites make it hard to find REOs — searching for key terms like “sold as-is,” “foreclosure,” or “lender owned” can narrow your search when looking for bank-owned properties. In New Jersey, when a property doesn’t sell at auction, the lender takes possession and tries to sell the property themselves — this is called a real estate owned property. Whether you’re a flipper, homeowner, or investor, foreclosed homes in New Jersey offer a compelling option for finding undervalued properties. That means no matter what an inspector turns up, it’s unlikely to be fixed.
Don’t assume you’ll have access to the property right away — wait at least 10 days before making repairs. Many of these homes have been neglected or vacant for extended periods of time, so budget for repairs. They're usually all-cash purchases only — bring a certified check or money order for the deposit.
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