I’ve called the Garden State home my entire life and so has most of my family. We’re a pretty tight bunch too, always leaning on each other for advice and support. My brother, for example, is a doctor and gets asked everything from what to do for sore joints to which fruits and vegetables are best. Being a real estate investor, I’m the one everybody comes to when they want to know if it’s prudent to invest in real estate after retirement and whether updating a bathroom will improve the property value. That said, I was still surprised when my brother’s kid, Brett, came to me wanting to know how to find foreclosed homes in NJ. I was sure he was heading off to medical school in the fall to follow in his pop’s footsteps. As it turns out, he wants to follow in mine.
How to Find Foreclosed Homes in NJ
The current state of foreclosure activity in New Jersey is grim for homeowners, to say the least. Though the number of foreclosures has dropped another 19% nationwide during the first quarter of 2018, according to ATTOM Data Solutions, foreclosures in my home state were at numbers higher than pre-recession totals. About one in every 233 homes in New Jersey had a foreclosure filing against it in Q1—the highest foreclosure rate in the country—indicating that many homeowners still have trouble paying the mortgage.
If you’re a budding real estate investor, like Brett, or a more seasoned one, like myself, the ongoing foreclosure crisis in New Jersey gives a fairly clear-cut answer to the question of whether you should buy investment property or not this year. But, particularly if you’re just starting out, knowing where you should look to find these foreclosed homes might be less obvious. So, since I’ve been doing this for a while, I’ll give you a few hints.
County Sheriff Sales
Most counties throughout New Jersey hold public auctions on lender foreclosed homes at county sheriff sales by order of the court. You can usually find a list of properties, with auction dates and times, advertised in local newspapers and on the sheriff’s website. Sale terms and starting bids are often online too, as well as updates about the property’s foreclosure status and, sometimes, whether there are any known liens, back taxes, or unpaid utility bills. Deposits can be substantial and must be paid in cash or a cash equivalent, like a cashier’s check, on auction day. In Middlesex and Essex Counties, for example, 20% down is required of the highest bidder. But, in these counties, the balance isn’t due for another two and four weeks respectively—a longer-than-average timeline for closing on an auction house. Ideally, this gives you some time to work in a home inspection and uncover any other undisclosed encumbrances on the property.
However, buying a foreclosure auction home is never that easy—especially in New Jersey. You’re never guaranteed access to the property, even as the winning bidder, and whatever your due diligence reveals is yours to deal with. So, any structural issues, uncooperative tenants, or unpaid water charges become your problem. Sure, you can back out of the sale. But, you’ll pay for it in interest, a lost deposit, the cost to auction the house again, or the difference should the home sell for less than your original bid. Even if it turns out you do have a good deal on your hands, the court can reject your offer, or give the homeowner more time to redeem the property—and leave you empty-handed.
Many government agencies, like the U.S. Department of Veterans Affairs, originate home loans and some, like FannieMae and FreddieMac, also buy them from other lenders. When homeowners can’t meet their mortgage obligations for any reason, these agencies will start foreclosure proceedings. You can search for a list of foreclosed homes by state on their respective websites and, usually, find detailed descriptions and pictures in addition to property tax rolls, school district info, and maps of the area. Since these homes get assigned a licensed real estate agent to handle the sale, you can often find them on sites like the New Jersey Multiple Listing Service (NJMLS), too.
Unfortunately, it’s pretty tough to invest in New Jersey real estate using government agencies as a source for distressed and discounted properties—and not just because each one has its own buying guidelines that you’ll have to get to know. These homes generate a lot of interest from owner-occupants, in addition to other investors, since they’re listed publicly on the MLS. And, oftentimes, it’s the owner-occupants, as well as non-profits and other government entities, that get first dibs. Plus, the listing agents who work with these government agencies are necessarily loyal to their clients, not you. So, the chance of getting your offer in—and accepted—while the getting’s good tends to look pretty bad.
Banks and Credit Unions
Banks and credit unions will absorb properties into their inventory of foreclosed homes after the court-ordered sheriff sale and attempt to sell them to the public directly. This can happen whether or not the auction was successful since the lender is sometimes the highest bidder at a sheriff’s sale. Like government agencies, traditional lenders typically use real estate agents to assist with the sale. So, you can find these properties on a bank or credit union’s website as well as on the MLS. The process of buying from a traditional lender can be smoother than other options since there is no government red tape or court approval to deal with. And, if you invest in an area like Atlantic City—home to the highest number of foreclosures in the nation—your selection of homes is considerable. Except, the price tag for these homes can be considerable too. These days, banks and credit unions often list a foreclosed home at or close to full market value, whether they’ve made repairs or not. And, you’ll be competing with other buyers using conventional sources of financing that allows them to pay what the bank wants. So, to beat out the competition, you’ll likely have to overpay and that’ll only beat your potential returns into the ground.
Of course, it’s good to know that you’ve got a few places to look for foreclosed homes if you’re interested in buying and renovating property as inexpensively as possible. But, I think it’s better to buy well before the foreclosure process even begins. There’s less competition, less red tape, and less of a chance you’ll end up with major repairs that turn your cheap property into an expensive mistake. It also gives a homeowner in distress an opportunity to get out of the financial gutter quickly and with less embarrassment. Sometimes, they’re able to walk away with a little cash in their pocket too. And, because New Jersey has one of the longest timelines from foreclosure start to finish, there’s time for you—over 1,100 days on average—to find and help them. Want to know how? Here’s another hint.
How to Connect With Distressed Homeowners Pre-Foreclosure
Back when I was Brett’s age, I had no idea I’d end up investing in real estate later in life. I was too busy following a more traditional corporate path that only led to long days at the office and a short fuse. That he’s already thinking about it and planning for it is impressive—and smart. By getting started now, he’s bound to be off to a good start in this business. And, I’m glad I’m around to get him going in the right direction because when I was a new investor I chased a lot of dead-end deals, like foreclosed homes. It was only after I became an independently owned and operated HomeVestors® franchisee, and realized the value of having motivated sellers come to me, that I was able to turn my luck and livelihood around. In fact, without the marketing and lead generation tools that HomeVestors offers its franchisees, including the “We Buy Ugly Houses®” national ad campaign, I might still be chasing foreclosures—and my tail.
Redirect your investment strategy by connecting with distressed homeowners before they’re foreclosed on. Contact HomeVestors today to discuss joining Brett, me, and the rest of the team—no matter your age.
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Prior to joining HomeVestors, I spent 20+ years as a senior corporate executive. The money was good but I just no longer enjoyed what I was doing. I had been looking at HomeVestors for a couple of years but they were not offering franchises in N.J at that time. I had zero experience in real estate investing and was impressed with the training and support HomeVestors offered. HomeVestors opened up the NJ market in February 2007 and I started in July. Best decision I ever made. We got off to a fast start and have purchased a couple hundred properties since. We could not have done this without the training, systems, marketing and support HomeVestors provides. We haven’t looked back since. We became Development Agents in 2010 and really enjoy working with new franchisees when they come on-board and helping them build a successful business.