Foreclosure Practice (Auction) in NJ

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Foreclosure Practice (Auction) in NJ

Chris Parr
Freehold, NJ · Member since 2017 · 6 posts · 0 votes

Hello,

I have started to investigate obtaining a house through a sheriff's auction in Monmouth County NJ.  My plan is to buy a single house, do repairs and upgrade and possibly sell in a few years to reap a tax free program that exists.  I also am looking to downsize and reduce my tax burden from where I am now.

There are some strange things that I have seen and I was hoping that this forum would be able to answer my questions.

I have been watching a house auction that has been delayed many times.  This seems normal.  My concern is how to research the extent of the liability that comes with houses.

From what I have read, the secondary liens are removed at auction and all I need to worry about is back local taxes, IRS taxes and water/sewer bills.  Sounds like a second mortgage might be forgiven but that doesn't make sense.  

Also, I can easily find the local property taxes, but what about other liens.  County clerk can provide?

Do auction buyers typically do a title search ( pay for this?).  Seems strange that I would drop $200 for a title search when the house might settle.  They also don't announce the starting bid proposed by the plaintiff until the moment the house is put up for auction.  Does everyone assume that is the amount of the primary mortgage?

Thanks for all the input.

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  • Jason Timmerman
    Howell, NJ · Member since 2016 · 87 posts · 56 votes
    9y

    Well the County Clerk and in Monmouth County, the Hall of Records, are the places to go to obtain some of the information you are seeking.  At the County Clerk's office you will be able to request a property report and that will show you the secondary liens on the property. 

    What do you mean the house might settle?  If you are referring to the homeowners settling with the bank that is a very, exceedingly rare circumstance once the Sheriff's Sale date has been assigned.  There are two statutory deferments of the date.  These exist ostensibly to allow the homeowner to attempt to come up with the money and to find another place to live.  But I don't know if I've ever seen a homeowner come up with the money. 

    As for the starting bid, the bank has to make the first bid and it will always be the deficiency owned on the mortgage. On many properties purchased during the real estate boom between 2004-2007, the deficiency will be far greater than the value of the house. Many times you will have a $300,000 house with a mortgage deficiency of $500,000. You need to do your research so that you are not wasting your time at auctions. Many of these properties become REO and when they re-hit the market you will have a shot at them but you will also be in competitive bidding wars on the good ones.

    Your best bet is to work with a wholesaler and/or make sure you are only going to the Sheriff's auctions for worthwhile properties.  There are obviously some good auction properties but there will also be a lot of competition.

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  • Chris Parr
    OP
    Freehold, NJ · Member since 2017 · 6 posts · 0 votes
    9y

    Jason,

    Thanks for the information.  Makes sense that a settlement with the "owner" is unlikely at this stage.

    I will check with the county clerk to get more information.

    Is there any truth that the only money owed after a foreclosure are delinquent property and IRS taxes as well as smaller water sewer bills?  Secondary mortgages/junior liens are forgiven?

    How does working with a wholesaler work?  Does the situation ever happen that buyers at the auction might be willing to resell the properties in their current state?

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  • Mark Scarola
    Developer · San Diego, CA · Member since 2014 · 294 posts · 70 votes
    9y
    Originally posted by @Chris Parr:

    Is there any truth that the only money owed after a foreclosure are delinquent property and IRS taxes as well as smaller water sewer bills?  Secondary mortgages/junior liens are forgiven?

    It wouldn't be accurate to say that second mortgages are forgiven. Rather junior liens are wiped out at an auction. Any creditor with a lien can foreclose on a property and afterwards all liens junior to the foreclosing lienholder are wiped out. So if a first position mortgage foreclosed and there's a second position lien, that second will be wiped out (the loan is not forgiven, but the lien is removed or "stripped"). If a second position lienholder forecloses then all liens junior to the second are wiped out. In all cases senior liens (those coming before whoever forecloses) remain, and yes that typically means taxes.

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  • Chris Parr
    OP
    Freehold, NJ · Member since 2017 · 6 posts · 0 votes
    9y

    Thanks Mark.  Makes sense.

    Anybody know if buyers at auction are able to easily flip the property to another interested party.  Are there any provisions like used car sales where the dealer never titles the car and avoids some fees (taxes , etc).  I guess the costs here might be recording the deed, NJ transfer tax.  Just curious how a person who flips properties might be able to work through some constraints.

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  • Chris Parr
    OP
    Freehold, NJ · Member since 2017 · 6 posts · 0 votes
    9y

    Jason, 

    Just visited the Monmouth County Clerk and they did not have anything referred to as a property report.  I was pointed toward the open records system.... .something that is available online.  On that site I could look at documents for Deeds, Mortgages, Lis Pedens, etc.  What I could not find is what is currently owed to the plaintiff.  I can estimate this based on the last mortgage and when it was taken out.  I guess this is the best anyone can do?

    The records also do not show when a mortgage was paid off.  I just assume based on the total what is happening in order of date.  310K ( initial mortgage at purchase), 30K (second mortgage/line of credit), 360K refinance...

    Anyone...   Still interested in learning more about how a house might be "flipped" soon after auction.   If anyone has anything to share, I would appreciate all info.

    Thanks.

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