With an average of 240 homes going into foreclosure each month in New Jersey and thousands at various stages of mortgage delinquency, a savvy buyer may be able to snatch a bargain. If you do your homework and enlist a professional to guide you through the legal and financial issues, you may save 10 to 20 percent or more. Here are some terms and tips:
• Short of actual foreclosure, properties may become available when owners begin to default on their mortgages and lenders get antsy. These are called short sales, and are usually listed by a real estate agency. Buyers negotiate with the homeowner and the lending institution that is owed money, both of whom need to approve the sale. Homeowners can save their credit rating, and banks are willing to accept less than what is owed to recoup some of their loss.
• Properties being sold as foreclosures can be found in newspapers under “public notices,” listed county by county as “sheriff sales.” The ad will give the address, a limited description, the date of the sheriff’s sale, and an estimate of what amount will satisfy the lien. Available foreclosure properties can also be found on some banks’ websites and through web services like nj.foreclosure.com or foreclosurenet.net, which charge a fee.
• The sales take place at the designated county court and are conducted like an auction. If your bid is accepted, you will be asked for a bank check of 20 percent on the spot and the balance in ten days. The original owner has a ten-day “right of redemption” to pay money owed and reclaim the property. Buyers are not allowed to inspect the property before purchasing it. Disgruntled owners who know they’re losing their homes may let the structures run down or intentionally trash them.
• On taking possession, the new owner may find squatters—the former owners or renters—still living in the home and have to initiate costly eviction proceedings.
• Consult a real estate agent, a lawyer, and an accountant to understand the procedures and the legal and tax ramifications of buying a foreclosed property.