In spite of the coronavirus pandemic, the New Jersey real estate market is booming.
The average house price in the Garden State, as of December 2020, was $367,103 which is an 8.5% increase versus 12 months ago. And according to Zillow, NJ house prices are forecast to increase by 10.8% over the next 12 months.
Residential property rents are also very strong in NJ. The average rent as of December 2020 is $1,975, which is 19.7% more than the national average.
What’s more, NJ real estate investors have plenty of inventory to choose from, thanks to the fact the state has the highest foreclosure rate in the country. So buying a foreclosure at auction in NJ can be a great way to enter this lucrative and fast growing market.
That being said, foreclosures are not as straightforward as your average fix and flip project. With this in mind, we’ve compiled our four top tips that outline how to buy a foreclosed home in NJ and the pitfalls you need to be aware of. Let’s start off with auctions:
1. Get Up to Speed With Housing Auction Practices
If you’re looking to buy a NJ foreclosure at auction, you need to understand what type of home auction you’re going to.
There are three categories of home auctions:
- Absolute auction – This is where no minimum price is set and the property is sold to the highest bidder. The seller must accept the outcome of the bidding.
- Minimum bid auction – Also referred to as the reserve price, a minimum bid auction means that a minimum price must be reached by at least one bidder for the property to be sold. This minimum bid is published and must be accepted by the seller if met. Once someone reaches the minimum price, the highest bidder wins.
- Reserve auction – Often confused with a minimum bid auction, a reserve auction means that the seller’s minimum price is kept private. Furthermore, the seller has the right to reject a winning bid within 72 hours.
Depending on the type of housing auction you go to, you may or may not be able to carry out your own inspection of the home before buying. It’s worth asking the auction event manager if you can view the property pre-purchase.
However, if you’re well versed on what you’re attending – and the price is right – you may still consider going ahead with buying a foreclosure at auction, regardless of whether or not you’ve inspected the property.
Pro Tip: Foreclosures at housing auctions can be bought with hard money. You will need to go through a few steps and work closely with your lender, but hard money is a very popular choice for financing foreclosures at auction. Read our guide on how to use hard money to buy a foreclosure at auction for more information. Or get in touch with us if you want to discuss financing for your next foreclosure property.
2. Inspections Are Pivotal
Investing in a top-notch home inspector or surveyor could save you thousands in the long term. This is particularly pertinent if the house hasn’t been occupied for a period of time. Experienced surveyors will be able to identify any foundational weaknesses and structural defects. In turn, this can help you avoid any nasty surprises during the renovation.
Moreover, if you’re looking to fix and flip your foreclosure, a home inspection and appraisal gives you an accurate calculation of the property’s ARV (after repair value). In addition, If you’re using a NJ hard money lender to secure financing, they will require an experienced contractor and/or inspector to look through the property.
If you’re worried about selecting the right home surveyor, do a bit of research into former client reviews. Not only does Google list a host of NJ home surveyors with reviews, websites like Trustpilot are extremely reliable at giving a good picture of the standard of service a particular home surveyor would provide.
Looking for help buying a foreclosure in NJ? We Lend has a strong network in New Jersey and provides hard money loans to investors looking to flip NJ homes for profit.
3. Do Homework On the Property and The Local Area
A home surveyor should do this, but that doesn’t mean you can’t do it too.
Understanding a foreclosure’s status and history is key to knowing its real value and potential returns. Firstly, dig up any old census records within the local area. This way, you’ll be able to begin building a picture of who owned the property, when, and for how long.
Likewise, doing your due diligence when researching the listing’s local area is a must. What you’re looking for is an up-and-coming area in New Jersey, one that still has relatively low prices but shows high growth potential for property value.
Moreover, if you’re looking for some tell tale signs of more risky foreclosure investments, keep an eagle eye out for:
- Inaccurate property information on the listing
- The property still has occupants
- The property has one or multiple liens
4. Short Sales Are More Straightforward Than Buying At Auction
There are two ways of buying a New Jersey foreclosure:
- Through an Auction
- In-person purchase from the homeowner
The latter, known as short selling, allows you to go and inspect the property and deal directly with the homeowner. Negotiating without a middle man means that the owner has added incentive to give a better price. Moreover, auction and realtor fees don’t factor into the price.
To do a short sale, it’s likely that you’ll need a loan to pay for the house. If you need to secure the property quickly, it could be worth enlisting the help of a credible hard money lender.
The Bottom Line
Buying a foreclosed home in NJ doesn’t need to be difficult.
With the trajectory of New Jersey’s real estate market, this is the time to invest in property, especially if you can find a good deal on a foreclosed house.
Remember to do diligent research and find a reliable home surveyor before signing on the dotted line. If you want more information on how to finance the purchase of a foreclosed home in NJ, get in touch with We Lend today.