How to Buy Foreclosures in New Jersey
How to buy pre-foreclosures | How to buy properties at auction | How to buy REOs | How to buy HUD homes | Summary | FAQs
Whether you’re a flipper, homeowner, or investor, foreclosed homes in New Jersey offer a compelling option for finding undervalued properties.
Historically, New Jersey has consistently had one of the highest foreclosure rates in the nation. Although this has unfortunate implications for many homeowners who are falling behind on payments, it does create an opportunity for someone new — maybe you — to take over those homes.
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.
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This guide will tell you everything you need to know to get started finding, evaluating, and buying a New Jersey foreclosure.
At a glance: State of the New Jersey foreclosure market
- March 2022: New Jersey had the second highest rate of disclosures in the U.S.
- 1,860 foreclosure filings out of more than 3.7 million housing units
- Counties with highest foreclosure rate (from highest to lowest): Burlington, Cumberland, Gloucester, Camden, and Ocean
- Counties with high foreclosure volume: Bergen, Camden, Essex, Gloucester, Ocean
✍️ Editor’s take: New Jersey has a consistent track record of high foreclosure rates. Being a judicial state with a redemption period — both discussed below — creates some obstacles for investors and homeowners alike trying to scoop up these properties for undermarket value, but the opportunities are still there. You just need to be patient, disciplined, and well-informed on how the process works.
We recommend all buyers try to get to properties during the pre-foreclosure stage to avoid the additional requirements and risks inherent in the foreclosure auction stage.
How to buy a foreclosure in New Jersey
“Foreclosure” is a general term that can refer to a variety of property types and/or stages in the foreclosure process:
- Pre-foreclosures: These are New Jersey homes that have been informed of intent to foreclose and are being listed on the open market to avoid an actual foreclosure.
- Homes being sold at auction: These are homes that have been advertised publicly for at least four weeks and are being auctioned off by a third-party trustee.
- Bank-owned foreclosures (REOs): Foreclosures that don’t sell at auction become the property of the lending bank and listed on the open market with agents as real estate owned (REO) properties.
- HUD Homes: The Department of Housing and Urban Development (HUD) sells FHA foreclosures via online auction. This is a good option for aspiring homeowners; HUD has plenty of inventory and prioritizes owner-occupant buyers.
In New Jersey, the rules governing foreclosures can vary depending on location, the stage in the foreclosure process the property is in, and what kind of buyer (investor, homeowner, nonprofit organization, etc) you are.
Buying New Jersey pre-foreclosures
⚡️ Key takeaways
Pre-foreclosures are properties with owners who have been notified of foreclosure intent, usually because of delinquent mortgage and/or tax payments.
New Jersey lenders must wait until a borrower is at least 120 days behind on payments. At that point, lenders can deliver an Intent to Foreclose notice to the borrower.
New Jersey is a judicial state, so the lender must wait 30 days before filing a complaint with the court, and the homeowner has 35 days to respond. If a judge rules in favor of foreclosure, New Jersey law requires the local sheriff to sell the property at auction within 150 days of the house officially being foreclosed on.
However, the pre-foreclosure time frame can vary substantially — it can take eight months from the Notice of Default to a property being sold at auction. The average time for a foreclosure to complete the process in New Jersey is over three years!
This is why getting a home during pre-foreclosure is your best chance at finding a good deal. Everyone involved wants to avoid the time-consuming foreclosure process. When everyone’s interests are aligned, that’s where the best deals are found.
Where to find New Jersey pre-foreclosures
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.
Working with an agent can be beneficial here because they have access to the MLS listings before they show up on real estate websites like Zillow. Your agent can monitor the markets of interest to you and send you regular updates on available pre-foreclosures before they hit popular sites, giving you a jumpstart on the competition.
» FIND: Connect with top New Jersey agents, set up instant MLS alerts
How to buy New Jersey pre-foreclosures
Buying pre-foreclosures in New Jersey is similar to buying conventional homes. The biggest differences are:
- The seller is extra motivated.
- You may be operating in a condensed time frame.
- Additional complications may arise if the owner decides to repay their debts or declare bankruptcy.
Once you find a property you want to buy, you or your agent can reach out to the owner and submit your offer. Remember that distressed owners are people too, and they’re going through a rough patch, so be considerate of their situation.
The seller will either accept, deny, or counter your offer. If they're amenable, you can make your offer contingent on an appraisal and/or inspection.
⚠️ Short sales: Sometimes, sellers in pre-foreclosure owe more on their mortgage than the home is worth — this is called a short sale. In these circumstances, you may have to be prequalified for funding and negotiate directly with the seller's bank. Your agent will be able to guide you through this process.
✅ A few more helpful tips
- Consider including a letter in your offer explaining why the seller should work with you (e.g., salvaging their credit score).
- If the foreclosure deadline is approaching, a fast close makes your offer more appealing.
- Work with an experienced agent to find good properties and negotiate mutually beneficial deals.
- You’ll also want a good attorney to run a thorough title check and ensure you don’t run into any nasty legal surprises down the road.
- Keep in mind, the seller is losing their home — so be compassionate!
Buying homes at New Jersey foreclosure auctions
⚡️ Key takeaways
When a borrower fails to repay their debt or file for bankruptcy prior to the date of the foreclosure sale, then an auction is held to sell the property.
These auctions are held by the county sheriff, usually in person at the courthouse or another government-owned building.
Prior to the sale, these auctions are publicly listed in newspapers, websites like Zillow or RealtyTrac, and on county sheriff websites, such as:
Auctions require 20% deposits to be paid on the day of the auction with a certified check or money order. If you submit a winning bid, you have 30 days to pay in full, BUT you may be charged interest if you wait too long — the day interest begins to accrue varies by county (e.g. 11 days after sale in Essex county), so check your county sheriff website to determine when interest starts to accumulate.
If no one submits a winning bid at the auction, the bank or government will take possession of the property and attempt to sell it themselves.
Where to find New Jersey foreclosure auctions
All New Jersey foreclosure auctions must be advertised for at least four weeks in a local newspaper. You can either search your local newspaper for these listings or conduct a broader search online at njpublicnotices.com.
Auctions are also sometimes listed on popular websites like Auction.com or Hubzu.com.
How to purchase a New Jersey foreclosure at auction
The rules governing auctions vary by county, but your first step will usually be securing your financing. Since auctions require cash to purchase, you’ll need the funds in your personal accounts or you’ll need to acquire the funds from a business partner, hard money lender, or private investor.
Once you have the funds ready, you should contact the sheriff for important details regarding the auction, such as:
- Bid increments
- Date of auction
- Deposit amount
- Minimum bid
- Payment timeline
- Payment type accepted
👉 Before you bid:
- See if you can inspect the property: If you contact the trustee in advance, they might agree to let you do an inspection (more often, they won’t). Just know that all auctions are as-is sales.
- Have an attorney run a title check: You should run a title check in advance to avoid any issues with title transfers (also consider purchasing title insurance!).
- Decide maximum bid: Competition and emotions are dangerous forces in auctions, so determine the maximum bid you’re comfortable with in advance. We recommend you decide the maximum amount you’re willing to pay before the bidding starts so that your emotions don’t trick you into overpaying.
⚠️ Be aware of New Jersey’s redemption period: In New Jersey, homeowners are allowed to file for Chapter 11 or 13 bankruptcy, which gives them the opportunity to participate in a repayment plan between 36 and 60 months to get caught up on their debts and redeem their home. They can do this anytime leading up to the auction, which would cause the auction to be canceled or postponed.
Additionally, homeowners have up to 10 days after the auction sale is complete to pay their debt in full and retake possession of their house. As such, you should avoid making any major repairs or renovations until after the the10-day redemption period has ended.
✅ A few more helpful tips
- Most auctioned properties are bought sight-unseen, so bid conservatively.
- Many of these homes have been neglected or vacant for extended periods of time, so budget for repairs.
- Don’t assume you’ll have access to the property right away — wait at least 10 days before making repairs.
- Find out if there are tenants in the property. Investors must honor the lease from the previous owner, and owner-occupants must allow tenants at least 90 days to vacate the property.
Buying bank-owned foreclosures in New Jersey (REOs)
⚡️ Key takeaways
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 (REO) property.
The process of buying an REO is a lot like buying conventional homes, except you’re buying directly from the bank rather than a person.
Getting a good deal is still possible, but the bank is interested in getting as much money back on their investment as it can, so don’t expect a super deep discount on these.
How to find New Jersey REOs
It’s usually pretty straightforward finding REOs in your area. Your agent can find them on the local MLS, but they’re also found on websites like RealtyTrac, Zillow, and Hubzu.com.
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.
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.
To get a competitive edge, find a good real estate agent who can set up MLS alerts that notify you the instant a new REO hits the market in your target ZIP code(s).
💡 Quick tip: A good way to get the inside track on bank-owned properties is to establish a relationship with the REO department of local lenders. Banks are eager to get REOs off their books, so if you establish yourself as a credible, repeat buyer, they might come to you first before they list on the MLS.
How to buy REO foreclosures in New Jersey
After you find the REO property you want, you’ll go through the usual home buying steps that you would with conventional homes: Submit an offer, request an inspection and appraisal, and then negotiate the final terms of the purchase.
Conventional financing is usually allowed if the property meets lender requirements for condition and lien status. You can try financing with the lender who owns the REO to see if they’ll give you better terms or more flexibility, but don’t assume this will be an option.
Just like any other home purchase, you should budget for closing costs. Lenders usually have very specific guidelines in how they treat REO sales, so follow those instructions closely and don’t expect them to deviate from their process.
⚠️ Consider an attorney and owner’s title insurance
Sometimes lenders will only issue special warranty deeds for REO properties, as opposed to the general warranty deeds that are more common in conventional sales. Special warranty deeds only assure buyers that no encumbrances — that is, unpaid debts against the property — were acquired during the time the lender owned the property. The warranty does nothing to protect you from encumbrances from before the lender took possession.
We recommend you consult an experienced attorney to protect you against issues with title if you are new to the process.
✅ A few more helpful tips
- Be sure you have a letter of pre-approval before getting started — lenders won’t waste time on buyers they aren’t sure can pay.
- REOs probably aren't going to be the cheapest deal because lenders aren’t desperate to offload a property and want to recoup their investment.
- REO lenders have carrying costs, so the longer the property has been on the market, the more likely they'll negotiate with you.
- Work with an experienced agent and attorney to ensure your offer is submitted correctly to be seriously considered.
Buying HUD foreclosures in New Jersey
⚡️ Key takeaways
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.
Since the HUD process doesn’t vary much by state, we won’t go into detail here (full guide coming soon!).
How to buy New Jersey HUD foreclosures
To find HUD properties, search on the HUD Home Store. You must use an agent registered to use HUD to submit bids, so be sure to verify your agent is approved.
HUD only cares about price: It evaluates bids on a rolling basis, and will always accept the highest bid at the end of a given day that meets the minimum purchase price for that property.
🏡 HUD prioritizes owner-occupant buyers: All HUD properties are initially only available to owner-occupant buyers for a set period before bidding is opened up to investors. This makes it a good option for residential buyers looking for an affordable home. On the flip side, the properties that make it to investor bidding are often fixer-uppers.
Summary: How to buy foreclosures in New Jersey
In New Jersey, whether you’re buying a pre-foreclosure, foreclosure at auction, REO, or HUD home, there are a few things you need to do:
- Step 1: Determine your financing — If you want to buy a pre-foreclosure, REO, or HUD home in New Jersey, traditional financing may be an option depending on the condition of the property. If you want to bid at auctions, you’ll probably need the cash on hand — whether it’s yours or a private investor’s is up to you.
- Step 2: Search for your property — Check your local MLS and sites like Zillow or RealtyTrac for pre-foreclosures and REOs. You'll likely find auction homes on your county sheriff's website, while HUD homes are on the HUD Home Store.
- Step 3: Do your due diligence — Conduct a title search to ensure there are no outstanding liens or issues with the property. If possible, get an inspection and appraisal. While not required in New Jersey, working with an experienced attorney and/or agent will be very helpful here.
- Step 4: Make an offer or bid — In the pre-foreclosure stage, be respectful of the people you’re dealing with. For an REO or HUD home, be sure you’re carefully following the specific instructions for that kind of home.
- Step 5: Close on the property — If you acquired the property at auction, remember not to assume the deal is complete until the sale has been confirmed and the redemption period is over. In New Jersey, wait at least 10 days after the sale is complete to begin renovation.
- Step 6: Move or rent — Congratulations! Move in and enjoy your new property — unless there’s a tenant in place. Then you need to give them at least 90 days to move out. If you’re a landlord, you need to honor the terms of their lease.
If you’re ready to find your next real estate deal, find an agent with foreclosure experience who can start finding you deals now!
FAQs about buying foreclosures in New Jersey
Foreclosure auctions are run by your county sheriff. If you go to the county sheriff’s website, you’ll find a list of auctions identifying various properties, dates of sale, and the location of the auctions. You attend the auction, either in person or online per the auction instructions, and bid on the property in predetermined increments. Then you need to pay a 20% deposit the day of the auction and the full amount within 30 days (though interest accrues on the remaining balance in some counties before then).
Bank-owned foreclosures are also called REOs. These can be purchased directly from the bank just like conventional properties — that is, you locate a property you want, contact the lender, submit an offer, and then negotiate and close. The lenders will probably have specific instructions on how to conduct the transaction, so be sure to follow those closely.
You can find REOs on the MLS and real estate websites like Zillow or RealtyTrac. To get the inside track, we recommend you establish a working relationship with the REO departments of your local lenders.
Every county sheriff’s office should have a web page with a list of foreclosure auctions scheduled to take place in your county, but you can also find these advertised in local newspapers. Find pre-foreclosures and bank-owned properties in your area by searching real estate websites like RealtyTrac or Zillow, or have your agent locate them on the MLS.
You can find government-owned foreclosures on the HUD Home Store or HomePath by Fannie Mae.
Sofi.com. "Foreclosure Rate for 50 States." Accessed May 24, 2022. Updated May 16, 2022.
RealtyTrac.com. "Foreclosures." Accessed May 24, 2022. Updated May 19, 2022.