How To Buy a Foreclosed House in a New Jersey Auction
Real estate can be an attractive option to an investor. It can be less volatile than stocks and is more easily understood by a layman. Foreclosed real estate is an especially attractive option, since a buyer can get a property for as much as 30 to 40 percent below market value. According to foreclosure.com, as of June 2010, New Jersey is a state with many foreclosures (over 4,600) and a great deal more in preforeclosure (over 60,000) providing an excellent opportunity for an investor.
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Instructions
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Search foreclosure listings. Call New Jersey banks and ask them about their REOs (Real Estate Owned) and if they will be put up for auction. You can scan your newspaper's classifieds for sheriff's auctions, or you can sign up for an online directory, although they usually cost a small monthly fee. If you know any Realtors, it is also a good idea to ask them because they often have contacts and banks and may have an inside track.
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Research a property you are looking to buy. If you see one you like, you will not have the opportunity to inspect it prior to purchase, so it is up to you to perform due diligence. Buying a property at an auction is "buyer beware," but you acquire some protection by ordering a title search. Contact the bank or sheriff's office to obtain as much information as you can. A title search can be ordered for $100 to $200 through the county clerk's office in the county the property is located. All you have to provide is the address of the foreclosed home. The title search will reveal any liens against the property, as well as its legal description, zoning information and tax assessment. Typically there will be no mortgage listed, but other liens against the property, such as tax liens (unpaid taxes) or mechanics liens (money owed to a construction company that has performed work on the house). Consult your municipality as to whose responsibility it will be to pay the liens.
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Bid on the property at the auction. Foreclosed home auctions usually start bidding at $100. The bids increase in increments of $100 until the bidding reaches $100,000. At this point, the bidding increases in increments of $1,000 until the property is sold.
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Pay a percentage of the final bid. In New Jersey, you will owe 20 percent of the final bid the day of the auction. So if you buy a property for $200,000, you will need to pay the auctioneer $40,000 that day. You can pay in cash or with a certified or cashier's check.
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Pay the balance of the foreclosed house. In New Jersey, you have 30 days to pay the remainder owed on a purchase of a foreclosed home. If you are going to be obtaining financing through a mortgage lender, make sure that they can process and close the loan in that time frame. Just be aware that, in New Jersey, the owner of the home has 10 days after the sale to redeem the property, reverting it back to his or her ownership. In this case, your deposit will be refunded and you will have to start the process again.
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- Photo Credit house image by Cora Reed from Fotolia.com
