Property Q&A in Delanco>Question Details

Mari Jermaine, Home Buyer in Delanco, NJ

can i buy a foreclosure with an FHA loan? will a foreclosure by auction on oct 1allow me to close by Nov 30 to recieve the $8000 tax credit? thank you

Asked by Mari Jermaine, Delanco, NJ Thu Sep 17, 2009

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First a bit of background on how are New Jersey mortgages foreclosed
In New Jersey, the lender goes to court in a "judicial foreclosure" proceeding where the court must issue a final judgment of foreclosure. The property is then sold as part of a publicly noticed sale (auction). The Superior court has jurisdiction on foreclosures. A complaint is filed in the court by a "lis pendens". (Its Latin but I forget what it means). But what a lis pendens is, is a recorded document that provides public notice that the property is being foreclosed upon. In NJ it takes about 8 months from the filing of the complaint to reach the actual auction. There's 3 stages at which foreclosure investors can acquire a property: pre-foreclosure, auction, and post-auction (REO aka bank-owned).

Here are some challenges with buying foreclosures:

Most foreclosed properties are sold at auctions where the buyers never have access to the inside of the home, so you don't know exactly what you are getting. The potential hazards here are obvious - from a kitchen with no appliances to a leaking oil tank.

The "good deals" are generally scooped up by the dozens by professional investors and banks. The starting bid is typically the amount of the loan remaining, so you need to find a house with equity to get a "good deal".
You generally need cash deposit at the auction. You can use your own lender for the balance which is due in a short period (few days to a couple weeks), in which event you should obtain a pre-approval letter (not a pre-qualification) to present on auction day. However, if you choose your own lender, there is no financing contingency. Failure to achieve loan approval and close the transaction within the specified time frame may result in the forfeiture of the buyer's deposit in accordance with your purchase contract.

The lower-risk approach is pre-foreclosures, where you contact homeowners directly who are in default. The competition for this is even stiffer than auctions, and again the professional investor has a huge advantage here, not to mention you're dealing directly with people who are about to lose their home and negotiating a good deal can be tough unless your cold-blooded.
Foreclosed homes at auctions are not necessarily delivered with a clear title - any liens or other mortgages on the property may fall on you, including utility bills and unpaid property taxes It would be cost prohibitive to do title searches on every house you hoped to bid on, so you can work with a title co. to do quick searches, but you're on your own to sort through the paperwork. One positive note - typically second mortgages are wiped out when the original lender forecloses.

Just because the home is in foreclosure, doesn't mean its vacated - you may have to go through the eviction process to get the default borrower out of your house.
"Right of Redemption".... it means the borrower can buy back his house for the amount of the loan even after you buy it in auction. NJ is not too bad, its only 10 days - some states have a much longer period.
The lowest risk stage is buying REO's - "Real Estate Owned" by banks. These are typically listed on the MLS, so we'll see these anyway. Upside is the bank will have already confirmed clear title, downside is you're not going to get much of a deal and you're still buying "as-is" properties and many do not turn on utilities for home inspections.

I suggest checking out for some more info and tools. Best of Luck!
Joseph Mancini
AVALAR Atlantic Properties
office: 856.256.1250
mobile: 856.275.6433
fax: 856.879.2024
2 votes Thank Flag Link Thu Sep 17, 2009
Hi Mari,

Yes, you can buy a foreclosure with a FHA loan. You just need to be careful on who you chose to help you with your transaction. Everything from your loan officer to your realtor. Someone that knows how to deal with foreclosures from a realtor's side... and a loan officer and their company, that can do this in a timely manor. Sure, I would love to help you. But my comment and statements aren't to suggest that you should only deal with. Just that there are too many loan officers making promises that can't be kept, and many of them know when making this so-called promise.

I just talked to a borrower yesterday that applied in June and was suppose to close in August. She is being told, 3 more weeks. Again, some loan officers will just tell you what you want to hear, just to get you in the door. And when the have you, and problems occur, they tell you not to worry. This in my opinion is a major flag. Do some investigating on the loan officer and or the company. If you Google my name, Jeff Belonger, I come up all over the place. You can read about me.

Overall, it starts with a very good loan officer that pre-qualifies you correctly, this way it avoids any unnecessary problems at the end. And just for the fact that they educate you about the process of buying, from start to finish.

If you have any other questions, please don't hesitate to call me. It's taking us about 6 days to underwrite a loan right now and that we could close a loan in 15 days, but we prefer 30 days. It's taking many lenders 45 plus days...


Jeffrey J. Belonger
Area Manager/Branch Manager

Infinity Home Mortgage Company, Inc
Processing : 800-587-2762
Cell : 609-440-5133
Fax : 775-361-6619

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"The referral of my service to your friends and family is the highest compliment I can receive."
1 vote Thank Flag Link Thu Sep 17, 2009
If the property has a leaking underground oil tank and you qualify, New Jersey has a grant program that will pay for the clean-up cost. My company can pre-qualify you but it is important, if you are looking to receive from the state most of the cost, you use a contractor that will charge you rates the state will use to determine reimbursement. Even if the tank has not leaked and it is an underground tank New Jersey will provide you with a grant of up to $3000.00 to remove and replace the tank. Contact us and find out your options.
Web Reference:
0 votes Thank Flag Link Fri Sep 18, 2009
Hi Mari,
I believe your talking about 309 LILAC Ln, Delanco which is scheduled for sheriff sale on 10/1/09. I've been buying sheriff sale properties for 8 years and have only seen financing done twice in that time. It's difficult if not impossible for too many reasons to explain but most often is that you don't have access to the property to get your lenders appraiser inside. Even if the house is vacant, you'd be trespassing to do the appraisal prior to owning the property, not to mention a dozen other problems that could come up. If you want to buy at the sheriff sale, you'll need the cash.... 20% the day of the sale, the balance in 10 to 30 days, otherwise you risk losing your deposit. visit the sheriffs website for more details on the sales process....

The other problem with getting your Tax credit is that the sale dates are often delayed (adjourned) for weeks and months for no apparent reason.

Sorry, it doesn't look good for this one. Best wishes,

Hope that helps
Joe Montenigro
Broker Owner, REMAX Home Team
serving Gloucester Twp and Southern NJ
0 votes Thank Flag Link Thu Sep 17, 2009
Often times what the public view as a "foreclosure" home is not a home that is actually listed for sale. Realty trac and other sites list homes that a notice to foreclose has been filed or homes that may go to auction. Some of these homes may never be sold on the open market. The homeowner may get a loan modification or some other workout. They maybe working on trying to obtain a short sale as well. Some may file bankrupty which may buy them some more time. This is misleading to many buyers for they are NOT properties listed for sale. Sometimes the price shown is tens to hundreds of thousands less than market value. The question being asked here is about a home that may go to auction. Not a home that has been foreclosed on then relisted for sale. So to add more clarity there's many reasons why you can't use an FHA loan to purchase a home at a foreclosure auction.

Yes you can purchase that has been foreclosed on then relisted for sale using a FHA loan. These homes will be listed in the local MLS with real estate brokers just like any other property. Most will be sold as-is making you the buyer respondsible for township certifications. The condition of these homes will vary. And depending on the condition will dictate whether an FHA 203(b) or 203(k) is appropriate. In addition to being be sold as-is they will likely have corporate addendums will be attached. Having a dedicated real estate attorney is key important in navigating thru these non-standard contracts. At times there is some potential to purchase these homes below market value. However not all bank owned homes are "good deals". But like all good deals they come and go quickly. I have assisted quite a few buyers in these transactions.

Trulia is good resource for potential Buyers and Sellers to receive real estate information. It is not a forum for debate.

Mari, I hope this further explanation will assist you or anyone else who may read this post in the future.

Best Regards,

Jeremy S. Hill, Realtor Associate,
Keller Williams Realty
Office: 856.685.1651
Direct: 609.876.5817
Fax: 609.482.8235
Licensed PA, NJ
"Your Interest 1st Always"
0 votes Thank Flag Link Thu Sep 17, 2009

Excellent feedback... 5 stars. Seriously, all I wanted to do was answer her basic question about FHA mortgages and foreclosures. I even stated, that she speak to a realtor that knows the foreclosure end and you broke it down perfectly.

0 votes Thank Flag Link Thu Sep 17, 2009

You say no..... just because it hasn't worked for you or your clients. I have closed 5 borrowers that bought foreclosures just in 2009. I also closed 3 in the last month that bought REO's and a few other types. You do make a good point, but I will disagree that foreclosures are for those that are real estate investors. You can also do a FHA 203-k loan if you had to, to fix up the property. Yes, you have to do a FHA appraisal, but they are almost like a conventional appraisal. Unless you have had difficulty, which could have been attributed to the lenders that you have used, that is a whole other issue. You need a loan officer that can have multiple solutions, especially when problems occur.

If giving advice, you get a home inspection on that property or an appraisal first, then put your offer in. But you do need to first get pre0qualified by a reputable lender/loan officer.

Overall, I have closed more than enough homes that were in foreclosure, bank owned, etc, etc. Don't make it out like it's not possible. If someone educates the borrower upfront, with their options, it's very possible. I just didn't want to get involved in more details with my first e-mail.

Mari.... please don't hesitate to call or e-mail me...


e-mail :

cell : 609-440-5133
0 votes Thank Flag Link Thu Sep 17, 2009
In short no. FHA requires that the home passes a appraisal. Usually once a home is foreclosed on repairs are required. When homes are auctioned off they are sold as is sight unseen. Also there is the issue of getting a clean title. If the property is being foreclosed upon then there is surely unpaid water and sewer bills. In addition the deposit that is required is large and cash or check is due within a short period of time. I suggest if you are already approved for a FHA loan to spend your time searching for a property that is listed for sale that is not a short sale or foreclosure. Auction homes are for seasoned investors who have cash available to purchase. You can search all the homes for sale at the homes are updated daily so you will always be looking at fresh info. If you need the assistance of a local professional it will be my pleasure to help.

Best Regards,

Jeremy S. Hill, Realtor Associate
Keller WIlliams Realty
Office: 856.685.1651
Direct: 609.876.5817
Fax: 609.482.8235
Licensed PA, NJ
"Your Interest 1st Always"
0 votes Thank Flag Link Thu Sep 17, 2009
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