New Jersey is a judicial state and there are 5 main stages to the foreclosure process here:
- First is the stage where the homeowner is paying their mortgage on time, they are living in their house and everything is going well. Then, unfortunately, something happens in the home owner’s life that prevents this person from being able to pay their mortgage. He/She may have lost a job, gotten a divorce, or had an adjustable rate mortgage and the payment increased higher than they are able to afford.
If you know a person in this situation, this is the best time to refer them to GreenPen Investments. We will have the best chance of being able to help them stay in their home, if that is their goal, or to help them sell the house by doing a short sale, if that is their goal.
- The next stage happens when the homeowner misses approximately 3 consecutive mortgage payments. At this point, the bank has contacted the homeowner several times to try to evaluate and fix the situation. If the bank that owns their mortgage is unable to resolve the situation and the homeowner cannot make their payments current, they will file a complaint with the county that the house is located in. A date will be set for the house to be sold at auction.
The situation, then, becomes public knowledge. The bank is legally obligated to run an ad in the legal section of the local newspaper and the homeowner will begin receiving numerous letters every day from companies that claim they can help the homeowner with their bills and wipe their debt clean.
This is still a good time to refer these homeowners to GreenPen Investments. At this point they are probably still living in the home, but the odds are starting to stack up against them and it is becoming harder and harder for them to bring the payments current on their mortgage. However, there is still a window in which we can work with them to do a short sale or help them get a loan modification.
- The third stage is the one that most people are familiar with – the auction at the court house. The bank that is foreclosing on the house sets the minimum bid they are willing to accept – this cannot go higher than the amount owed plus legal fees. Bidding typically proceeds in $100 increments up to $100,000 and then $1,000 increments over $100,000. At this point the sheriff will remove the residents from the property. Unfortunately, this process leaves a large blemish on the homeowners credit.
- If the house is sold at auction we continue to the fourth stage. This is a stage most people are unaware of, it is called the Redemptive Period. In New Jersey, the homeowner has 10 additional days after their house is sold at auction in which they can buy it back. This happens on occasion if the homeowner happens to come into a large sum of money. They are not allowed to resume payments, they have to fully pay off the balance of the mortgage (in cash), plus fees. This period is seldom used but allows the homeowner some extra time.
- The last stage is where GreenPen Investments typically acquires it’s properties. This is the stage in which the bank acquires back the home at the auction – either no one else bid on the property at auction, or the bank outbid them. The property then becomes known as an REO (‘Real Estate Owned’) or ‘Bank Owned’.
At this point the homeowner is no longer a homeowner and has left the property. The bank typically lists the house with a real estate agent and tries to sell it. The banks generally do not keep the houses in showing condition and often require sales to be all cash.