Cash Offers and Foreclosure Rescue Scams: How to Protect Your Equity in New Jersey

A cash offer can be a fair way to sell, but when you're under financial pressure, compare it with what the home would bring on the open market, have your own attorney read the contract, and never sign over your deed or pay anyone up front to "save" your home. New Jersey's Foreclosure Rescue Fraud Prevention Act adds specific protections for homeowners who are behind on their mortgage, including a right to cancel certain sale-and-stay deals.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. When a homeowner in Monmouth or Ocean County falls behind, offers to buy the house for cash can start arriving by letter, phone and text. Some come from real buyers. Some aren't. Your equity is often the biggest asset you have, so here's how to tell the difference and protect it.

Is a cash offer a bad idea?

Not by itself. Speed and certainty are worth something, especially with a deadline. The question is the price you pay for them. Before you answer any offer, know three numbers:

• What the home would sell for on the open market, backed by recent sales, not a guess. Start with your home's value.
• What you'd net either way after the payoff, closing costs and any repairs.
• How long each path takes, measured against the deadline you're facing.

If the cash offer still wins once those are side by side, that's a fine decision. Ask for proof of funds before you sign; here's what proof of funds should look like.

What should you check before you sign?

Start with who wrote the contract. New Jersey's three-business-day attorney review clause, under N.J.A.C. 11:5-6.2, is required in home sale contracts prepared by real estate licensees. A contract drafted by someone else may not include it. So have your own attorney read any contract before you sign, and ask about:

• The price, the deposit, and who holds the deposit
• The closing date, and what happens if the buyer doesn't close
• Inspections and access to the house before closing
• Whether the buyer can hand the contract to someone else
• Who pays which closing costs

What does a foreclosure rescue scam look like?

The Federal Trade Commission's warning signs for mortgage relief scams:

• "Scammers will demand payment upfront, before you get any services."
• They may want payment only by cashier's check, wire transfer or a mobile payment app.
• "Scammers may try to convince you to transfer the deed to your home to them."
• They may tell you not to contact your lender and to send your payments to them instead, which can leave your loan in default.

The FTC's advice is not to pay until the company delivers the results you want. Under the federal rule it cites, a company can't charge for help with your loan before you have a written offer from your lender that you accept.

What does New Jersey law say?

The Foreclosure Rescue Fraud Prevention Act, P.L.2011, c.146, protects owners of a "distressed property": a one- to four-unit home where the owner lives as a primary residence, that is in foreclosure or whose owner is more than 90 days behind on a loan secured by it. Among its protections:

• Foreclosure consultants must be licensed. A foreclosure consultant can't do business in New Jersey without a license from the Commissioner of Banking and Insurance. The Department of Banking and Insurance has a licensee search on its website.
• No pay until the job is done. A consultant can't collect any compensation until it has fully performed every service it promised and secured the relief for the owner.
• A right to cancel sale-and-stay deals. When a deal involving a foreclosure consultant transfers your home, lets you keep living there, and promises it back or gives you an option to buy it later, the law calls it a distressed property conditional conveyance. You can cancel the contract until midnight of the 10th business day after you sign it, or until a sheriff's sale concludes, whichever comes first.
• A floor on what you receive. In those deals, the act requires the purchaser to make sure you receive at least 82% of the property's fair market value.

How those rules apply to a particular offer is a question for your attorney. If you've already been sued, here's whether you can still sell when you're behind on payments.

Where do you get real help?

• Your servicer. The FTC says to contact your servicer or lender right away, even if foreclosure has started.
• A HUD-approved housing counselor. Free help with foreclosure prevention. Here's what a housing counselor does.
• An attorney, especially once you've been served papers or before you sign anything that transfers the house.
• Report a scam to the FTC at ReportFraud.ftc.gov and to your state attorney general.

How do I help when the house is part of the pressure?

I tell people what they need to hear, not what they want to hear. You get a written market evaluation, the cost to sell, a realistic timeline, and two plans side by side, so you can compare any offer on your kitchen table against real numbers. If a cash offer is the best of them, I'll say so. And if a foreclosure has started and there's equity in the home, I can list it and sell it on the open market before the sheriff's sale, working alongside your attorney, your servicer and a HUD-approved housing counselor, but nobody can promise a closing before the sale date. How I plan around a change like this is on my life events page, and the Life Events Guide lays out the order of operations.

Frequently Asked Questions

Should I sell my house to a cash buyer if I'm behind on my mortgage?

It can be the right move, but compare the offer with a market evaluation of the home and what you'd net each way, and have your attorney read the contract before you sign.

What is a foreclosure rescue scam?

The FTC describes scammers who demand payment up front, push you to transfer your deed, or tell you to stop talking to your lender and send payments to them instead.

Can I cancel a deal to sell my house and stay in it in New Jersey?

If it's a distressed property conditional conveyance under the Foreclosure Rescue Fraud Prevention Act, a deal involving a foreclosure consultant where you stay and can get the home back later, you can cancel until midnight of the 10th business day after signing, or until a sheriff's sale concludes, whichever comes first. Ask your attorney whether your deal qualifies.

Do foreclosure consultants need a license in New Jersey?

Yes. The act requires a license from the Commissioner of Banking and Insurance before a foreclosure consultant does any business in the state.

This is general information, not legal, tax or lending advice. Talk to an attorney before you sign any contract involving your home.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

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• Have a question this didn't answer? Send it to Dennis Mark and it may become the next article.