Many people might say that NJ has had a rough go with keeping people in homes that they can afford. This could be the result of high taxes, or not enough job opportunities for younger people looking to grow in their careers. In fact, during recent years, NJ has had one of the highest exit rates of young adults moving out of state. As a result of these factors, the real estate market gets its fair share of New Jersey foreclosures. If you are thinking of buying a property that has been foreclosed on, continue reading for answers to 5 of the most common questions we receive about dealing with New Jersey foreclosures.
Do Realtors get involved with New Jersey foreclosures, or do the banks handle everything?
Realtors get involved with foreclosure sales only if the property does not sell through an auction, commonly known as a sheriffs sale. If a property does not sell through the auction, it becomes known as an REO (real estate owned) property. The bank portfolio manager will then connect with a real estate agent to list the property for sale through the MLS. Once the property is listed on the MLS it becomes available to the general public and their real estate agents.
Why are New Jersey foreclosures cheaper than regular listings?
Foreclosures (REO properties) may not always be cheaper than regular listings. If they appear to be, it is usually because the house has been vacant for a number of years, and there are many repairs that will be needed in order to get the home back into living condition. However, the home buyer must realize it will cost a certain amount of time and money to get the house back into living condition, and they should calculate the costs of that extra effort in comparison to buying a non-foreclosed home. The end result may surprise you.
What are the risks with buying a New Jersey foreclosure home?
One of the big risks with buying a foreclosed home in New Jersey, is not having access to the full history of the property. When a property is bank owned, the bank usually does not have information on how old the roof or mechanical systems of the house are, or any other pertinent data. Sometimes the homeowner can even sabotage their home before they leave (as they are angry about their situation). Some cases have included pouring concrete down the toilet in order to ruin the plumbing system. Additionally, if the house has been vacant for a long time, many issues can crop up that end up costing a lot of money to fix. Also, banks usually sell strictly in “as-is” condition. They typically do not offer credits or do any repairs if there are any issues that arise during the buyers home inspection. If you end up finding big issues, you can cancel the deal, but you will have already spent the money for an inspection.
What best practices should New Jersey real estate buyers keep in mind when searching for a foreclosed home?
Some best practices include having a reputable contractor that can accompany you to the property. They can advise you on how much money may be needed for repairs, and what repairs will be needed in order to get the house back into living condition. As a buyer, you will also want to factor in the time and money required to invest into the house and compare that with the price of buying a non-foreclosed home. If there is not a large difference, you may be better off going with a traditional sale. If there is a large difference, and you stand to gain substantial equity in the home after the repairs are done, then it may be worthwhile. Also, this may go without saying, but it is highly recommended that you work with a New Jersey Realtor who has dealt with buying and selling bank owned properties before.
Should a first-time homebuyer buy a New Jersey foreclosure? Why or why not?
Usually we do not advise that first-time home owners buy a foreclosed home rather than a traditional starter house. First time home buyers usually rely on financing and are shorter on cash. They may also have a smaller repair budget. Also, when banks have the option of an all cash offer vs financing, they will usually go with an all cash option. The all cash option will have no contingencies and offer a quicker closing. Being a first time home buyer, it will be harder to get an offer accepted on a foreclosed home when competing with all cash buyers and investors. There are some instances where this will not be the case such as Fannie Mae Homepath homes. With Homepath homes, only first-time home buyers are allowed to make offers on the property up to a certain deadline. If the property does not get sold within that period of time to a first-time home buyer, they will then open it up to all buyers. However, with Homepath homes, they usually require work to get the property in living condition. So, any first time homebuyer who cannot wait to occupy the property will be better off going with a non-foreclosed home.
This concludes our article on 5 of The Most Common Questions We Receive On New Jersey Foreclosures. For more articles on buying and selling real estate in New Jersey, view the main page of our NJ Real Estate Blog. If you have more questions about buying New Jersey foreclosures, or want to discuss options related to buying or selling a New Jersey home, submit your contact information below.