How to Buy a Foreclosure in New Jersey: Sheriff Sales vs. Bank-Owned Homes

You can buy a foreclosure in New Jersey two ways: at the county sheriff's sale, or afterward as a bank-owned home. At a sheriff's sale you bid at a public auction, pay a 20% deposit the moment you win, get no inspection, and take the property subject to whatever liens a title search would show, while a bank-owned home is listed for sale, so you can see it first and buy it through an agent, as-is.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. I'm a former New Jersey home builder and residential remodeler, so when a buyer in Monmouth or Ocean County asks me about a foreclosure, I look at it the way a contractor does: the roof, the systems, and what a fix will really cost. Here's how each path works, using the rules the two county sheriffs publish.

What's the difference between a sheriff's sale and a bank-owned home?

New Jersey foreclosures go through the courts. After the court enters a final judgment, a writ tells the county sheriff to sell the property at public auction, and the sheriff has 150 days from the writ to hold that sale (NJ Courts). That auction is the sheriff's sale.

The foreclosing lender can bid too. When the lender ends up with the property, or an agency such as HUD or Fannie Mae does, it's usually put back on the market as a bank-owned home, also called REO, for real estate owned. Same kind of house, very different way to buy it.

How does a sheriff's sale work in Monmouth and Ocean County?

Each county sheriff runs its own sales and posts its own conditions of sale:

• Monmouth County: open auctions every other Monday at 1:00 p.m. at the Sheriff's Office Public Safety Center, 2500 Kozloski Road, Freehold, or Tuesday when Monday is a holiday. The winning bidder pays 20% of the bid at the sale, in cash up to $1,000 or by certified check or official bank check, and the balance within 30 days, with interest after the 10th day (Monmouth County Sheriff).
• Ocean County: sales on Tuesdays at 2:00 p.m., except legal holidays, at the Administration Building, 101 Hooper Avenue, Room 119, Toms River. The winning bidder pays a 20% deposit right away, by cashier's check, certified check or up to $1,000 in cash, with the balance due 30 days from the sale and interest from the 15th day (Ocean County Sheriff, Conditions of Sale).

Both offices post their sale lists online and warn that a sale can be adjourned, cancelled or stopped by a bankruptcy filing at any time, so check the status on the day of the sale.

What are the risks of buying at a sheriff's sale?

• No inspection. Both offices say inspecting the property isn't permitted, and Ocean says properties are sold in "as is" condition.
• Liens can come with it. Monmouth says every sale is subject to a first mortgage and any municipal, state or federal liens, which the purchaser takes on. Ocean says the buyer receives "no more, nor less, than the debtor owned prior to the Sheriff's Sale," subject to unpaid taxes, assessments, water rents and whatever a survey and title search would show (Ocean County Sheriff).
• The owner gets 10 days. The owner can redeem the property up to 10 days after the sale, and Ocean adds "or until the Deed is delivered." If the owner redeems, Monmouth refunds the buyer's deposit in full.
• Your deposit is on the line. In both counties, a bankruptcy filed after the sale means the deposit isn't returned to the buyer, and missing the 30-day balance can mean a resale at your expense.
• Possession is your job. In Ocean, the buyer isn't entitled to possession until the sheriff's deed is delivered and recorded. If the home is occupied, Monmouth says the buyer may have to apply to the court for a Writ of Possession.
• Some costs are yours. The buyer records the deed and pays the recording fees and the realty transfer fee.

How do you get ready to bid?

1. Get the title search before the sale, not after. Both sheriff's offices advise it, and an attorney can order it and tell you which liens you'd be taking on.
2. Price it from the outside. Without an inspection, value comes from recent nearby sales and repairs from what you can see from the street. That's where a builder's eye helps: I'll pull recent sales and give you my read on what the roof, siding, windows and foundation suggest about repairs.
3. Line up the money. You need 20% at the sale and the rest within 30 days. If any of it is borrowed, talk to your lender before you bid.
4. Set your top number and stop there. Value, minus repairs, liens, the transfer fee and your carrying costs, is the most the property is worth to you.

How is buying a bank-owned home different?

A bank-owned home is listed for sale, so you can see it, make an offer and work through a contract. HUD says its homes are listed on HUD Home Store "and usually on the Multiple Listing Service" (HUD), which means many show up in a regular home search. A few things work differently than a typical sale:

• As-is. HUD sells its homes in "as-is" condition, says it won't pay for defects or repairs, and strongly urges a professional inspection before you make an offer.
• Offers go through registered agents. HUD requires every bid to be submitted through a HUD-registered broker (HUD Home Store). Fannie Mae's HomePath homes take offers online from a buyer's agent registered on HomePath, and a prequalification or proof of funds is required before an offer is accepted (Fannie Mae HomePath).
• Owner-occupants go first. HUD gives buyers who'll live in the home an exclusive bidding period: 15 days for FHA-insurable homes, 5 for uninsured. Fannie Mae has a similar First Look period, and its owner-occupant buyers certify they'll move in within 60 days and live there at least a year.
• Their contract, their terms. Fannie Mae won't accept a contingency on selling or closing on your current home. Your attorney reviews the seller's contract and addenda before you're bound.
• Financing depends on condition. HUD marks each home IN (FHA-insurable), IE (insurable with a repair escrow) or UI (uninsured), and your lender tells you what fits.

Which path makes sense for you?

If you need a mortgage, an inspection or a move-in date you can plan around, a bank-owned home is usually the more workable path. If you have the deposit and the balance ready, an attorney for the title work, and room in your numbers for what you can't see, a sheriff's sale may be worth watching.

Either way, I tell people what they need to hear, not what they want to hear: a foreclosure isn't automatically a good price. It only works when the repairs and the paperwork work too. More on how I help buyers is on my buying page. Selling one to buy? Start with what your current home is worth.

Frequently Asked Questions

Can you inspect a house before a sheriff's sale in New Jersey?

Not in Monmouth or Ocean County. Both sheriff's offices say inspection isn't permitted.

How much money do you need to bid at a sheriff's sale?

In both counties, 20% of your winning bid at the sale and the balance within 30 days, plus interest on the balance after the first 10 to 15 days.

Do you get clear title at a sheriff's sale?

Not automatically. You get the title the owner had, subject to liens a title search would show. Have an attorney order one before you bid.

Can the owner get the house back after the sheriff's sale?

For a short time, yes. The owner can redeem up to 10 days after the sale, and if that happens, Monmouth refunds the buyer's deposit in full.

Do I need an agent to buy a bank-owned home?

For a HUD home, yes: HUD requires bids through a HUD-registered broker. Fannie Mae HomePath offers come from a buyer's agent registered on HomePath.

This is general information, not legal, tax or lending advice. Sheriff's sale terms change, so confirm them with the sheriff's office and an attorney before you bid.

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.

Keep reading

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• The full path, step by step: from pre-approval to closing in New Jersey.
• Have a question this didn't answer? Send it to Dennis Mark and it may become the next article.