David Kim

Your best bet is to buy the local paper and check out the legal notices. Also, there are auction notices online for Bergen County Sheriff's department. They list addresses and lien amounts. You COULD try to contact those owners/banks for a private sale prior to the auction date.

The BEST bet however is to talk to a REALTOR that specializes in your region (For Edgewater, someone with NJMLS subsciption). They can search the MLS for owner and bank listed short sales/pre-foreclosures/post-foreclosure listings. Also, understand those may not be the BEST deals out there. There are also homeowners who have owned their homes for many years and are not looking to squeeze every last penny since they are not "upside down" on their loans. Sometimes they are easier to deal with and you can get a good deal with them without the delays/headaches of short sales.

The other benefit of working with a Realtor of YOUR choice (as opposed to contacting the selling agent/broker yourself) is that you get an agent who represents YOU. A selling agent has no fiduciary duty to you and may not help you push for a better price. There is no cost to you to choose an agent on your own since the commissions are paid for by the sellers, but you get all the benefits of someone who's sole duty in the negotiations is to represent YOUR interest.

If you have any questions, feel free to ask me more questions. - Wed Jun 24 2009, 13:07

Randy, the counter offer format will be told to you multiple times to stall. My suggestion is to stick with what you are completely happy with (i.e. no chance of buyer's remorse). The government bailout is only delaying the inevitable. Too many people are WAY over their heads, regardless of "repackaging" of the loans. Some are already on the 40 year terms. If they allow 50-60-70 year terms or longer "interest only" loans, we're only making it worse. The market really needs to correct and correct fast then it will build up again once people get greedy again. Gotta love America, where the American dream is built on making something out of nothing. =P I actually refused to actively sell homes for the last 2-3 years because of where I saw the market. The only sale I did (reluctantly) was late last year, but only to a friend who is very well off and the home is mid-market priced (wasn't overly bloated). This was not a transition home, starter home, or investment. This was for them to live out their lives there. It is large enough in case they have a family, but affordable enough that even one of them could afford the payments and living expenses if need be. We're not all in their situation, but it's a wise plan.

Jaime, the broker did not require an earnest money deposit because of the way they operate (weeks before returning calls, etc.) Many of the Bank owned homes around here won't require it because they know they won't respond in time. They do however require proof of funds, pre-qualifications, and a signed contract.

I didn't persue telling the bank about their agent/broker because I am a Realtor myself and I'm sure you know we have a "law" that we can't say negative things about specific agents/brokerages. I also looked at it as a gift from them since I saved another $45k. =) I considered sending a card saying thank you for saving me $45k w/ a fruit basket, but I reconsidered.... =P

Another thing is the requirement that the selling agent must return an acknowledgement that the bank received the offer or to present the offer in person has not been honored by more than a few agents around here. By law they must abide by those requests unless they have a specific written and signed agreement where the sellers require all offers to be negotiated by the agent. When you do submit that offer, have your agent put that clause in the contract as well as a seperate acknowledgement page requiring the bank officer to sign and return within 48 hours. Technically all offers must be presented within 24 hours (1 business day in NJ, varies by state). If either of those terms are not met, you have legal basis against that brokerage. It would be up to you to decide if it is worth persuing. Honestly, I would love for people to stand up for their rights so less of the newly licensed (joined because of the boom) and highly unscrupulous agents would be relieved of their licenses by the state. Many of these same agents are the ones that convinced buyers that they can make money because the market is going up. There are many guilty parties in this mess, but now the conservative savers can take advantage of the moment. - Fri Oct 24 2008, 00:17

You can give any offer you want and the agent may not respond right away. I experienced this when I bought my home this summer and the agent's actions cost the bank an additional $45k. My offer was ignored even though our credit scores were both over 800, we have more than 20% down, and it was actually higher than the one accepted (we found out through another agent in their office). When that deal fell through due to financing issues, they did not call us back and it ended up going through auction (this is a bank owned auction, not foreclosure auction). We ended up getting the home for $45k less than our last offer ($385k final price). The selling agent chose the other offer because it was her client (both sides of the commission). There would be no other reason for it since we were the stronger candidate with a higher offer. You will experience this from certain agents who are getting desperate to squeeze every last dollar from every sale since the boom they helped create burst on them too. To be honest, I don't even think the bank was shown our offer since they didn't recognize the fact that we (the auction winners) were the highest offer they received during the regular MLS sales process. Also, not all excellent deal foreclosures are run down. Ours was built in 2005 and everything was in great shape and originally sold for over $600k when built brand new.

Here's one techique to know what is a good price (where's the bottom). For my home, comparable homes built in 2001 were sold for around $350k. This was a year or two before the market started to explode. I feel comfortable that homes will not dip below that amount. You should see what your home would've sold for in 2001/2002 and if it's almost down that low, you will be safe. 2003-2004 prices would be cutting it close and 2005-2006 prices would be unrealistic to consider buying.

Now, as for how low you can go... It's more important to say how HIGH can YOU afford to go. When purchasing out home, we decided on what rental values were, what we needed in a house and what we were willing to pay per month regardless of market value. The following should help you make this decision.

What would that property rent for and what are the taxes? There is a simple calculation you should make to ensure that even if prices go lower, you will not be one of statistics that can't afford their homes.

Take the amount of the home, assume you will get a home loan for 100% of the value and for every $100k, multiple by $600 and that will be your approximate monthly cost + taxes. If the market rent is higher than that, then you have a good deal. If not, why bother BUYING, when renting would be more financially responsible. Don't buy into the "but you will build equity" speech. That's how people got into this mess. Would you rather spend $2000 in a home loan SLOWLY building equity (assuming prices remain stable) or $1,500 / mt on rent where you SAVE $500 (CASH equity) per month?

Example for what you are looking at. $250k value (let's assume that won't budge).

2.5 * $600 = $1500/mt
Taxes (assuming around 3%, which is high) = $7,400/mt = $600/mt
Insurance = $480/yr = $40/mt
Total Cost of ownership = $2,140 (Not including maintenance / repairs)
I don't include utilities since you pay that regardless of renting or owning.

So if the market rent for that home is MORE than $2,140, then go for it since you can always rent it for more than you're paying for it. If not, then you need to consider if it is worth the premium of OWNING vs. letting someone else be responsible for major repairs (roof, driveway, boiler, HVAC, etc.).

While you do get a "tax credit" for the loan interest and taxes, considering that you would be paying $24k/yr, since you're married, it would be only $13k in benefits since the standard deduction is ~$11k. The exception is if you have a lot of itemized deductions. From what I know, Florida has no income tax to deduct, so you would be limited to sales tax and very specific expenses for itemization. You also have to consider the tax bracket you are in. I will just ASSUME (since I have nothing to go by other than the price range of the home you are looking at) that your household income is around $60k/yr. At that rate, you are in the ~15% tax bracket. At MOST, you would save $320 in tax benefits. That would be only if you already have $11k in OTHER itemized deductions.

I frown upon using that tax credit to justify a purchase because if you decide to rent it out, you no longer get those tax benefits and you will end up paying more than what you're getting for rent.

I hope I was clear enough and this helps you make a decision. Whatever you do, I wish you and your wife have a happy life together no matter where you call home. - Thu Oct 23 2008, 18:31

Typically, there is a three day attorney review period where "legally" the attorney can reject the contract for any reason. I do not believe they have to disclose the reason, but if they know they can get a better price (whether actually receiving an offer or just from other data, such as appraisals or another comparable home that just sold), they can argue the attorney is advising them that they are getting short changed on this business transaction.

However, that said, the others are right. Consult your attorney, whom you've already paid. He/She will be able to read the entire contract for any contingencies for a way to keep the seller in the deal. I warn however, the boilerplate contract used in the State of NJ does not have anything I know of that would protect your interests in this case. It would've had to been a contingency/clause added to the contract by your agent/attorney.

Techincally, you made an "offer to purchase" that was accepted by the seller. That is a contract. It then goes through attorney review and upon both attorneys accepting the terms, it becomes a completed contract. During this Attorney review period, the contract terms can still be negotiated by both parties. There is a procedural part where the attorney "cancels" the offer to purchase contract then after all negotiations are done (or at the end of the three day period), they declare the contract valid in its final form.

The reason the contract isn't binding until the attorney reviews it (or the buyer/seller knowingly refuses attorney review) is because Real Estate Agents are not allowed to practice law, which includes writing up contracts. That is why there is a boilerplate contract for NJ (and most states) that was part of a big court case settlement between Lawyers and Real Estate Agents. Agents were allowed to use that contract drafted by the Bar Association, but had to disclose to their customers that they can have an attorney review the contract on their behalf. If they don't disclose that fact, there are legal ramifications against that agent/brokerage. It is up to the customer to seek an attorney in a timely manner and have the attorney response within that 3 day period.

I wish you luck in getting this deal completed if this is your dream home! At the very least, I hope you recover your expenses such as the legal fees from the seller. Let us know how this ends.

P.S. After typing all of this, I realized other people may flag me as I am not an attorney (I am a Realtor specializing in Bergen County), so I searched for a little bit on Google and found the following article by a NJ attorney regarding real estate contracts. It is essentially what I just said above. I hope this helps! - Fri Sep 12 2008, 03:37

I would refrain from investing unless you are able to find an extremely good deal somewhere. Most multi-family properties are selling for way too much considering the rent roll coming in. Prices still have to come down more and property taxes are extremely high as well. Most properties have rents that wouldn't cover the mortgage alone (assuming 20% down) and almost all of them wouldn't cover the taxes and insurance added into the expenses. This doesn't include any landlord paid expenses.

This is not to say there is not a great deal SOMEWHERE out there, but it will be extremely difficult to find suck deals in the Northeastern NJ area. Other people's statements of getting 10% ROI are true, but as I stated earlier, good luck finding that. If you do, make sure the rents currently charged are market rate. Some are artificially high due to long term tenants w/ yearly increases. If they leave, you're back to square one on rental value.

In Hackensack in particular, there are some good values out there, but vacancy rates will be relatively high since there are a lot of empty rental units listed in Hackensack. To rent them out quick, I see listings on the MLS (I am a registered Realtor) dropping the asking price. Others with high rents are sitting empty for months.

There are properties in Hackensack that you can consider if you're still interested. I can help do the math and show you CONSERVATIVE earnings (or loss) estimates for each place.

Example of a loss property:
Selling for $500k, which at 20% down = $400k mortgage.
$400k mortgage @ 6% for a 30 year loan = $2400/mt (rates are slowly climbing right now so 6% may be hard to get).
Taxes = ~$12000 (for larger / newer places) that equates to $1000/mt
Insurance for a typical 2 family location is $1200/yr for a tenant occupied location. ($100/mt)

That equals $3,500/mt in expenses.
typical rents for a 3BR = $1500/mt (depending on condition, but we're talking about a $500k property).
Even if both units were 3BR's that's only $3,000/mt That's a net LOSS of $500/mt without including other expenses/repairs.

Some will try to convince you that you get to take "losses" from depreciation and the tax benefits would offset that, but that is far from the truth. Your actual CASH flow will remain NEGATIVE.

As a rough rule I've been using to calculate values, for every $100k you borrow, make sure you're getting at least $1,000 in rent, just to break even. That means for the property above, you need $4,000/mt income (since you're borrowing $400k). I also wouldn't count on "appreciation" of the property anytime soon. As much as the pundits would like to say the recovery is just around the corner, we have to consider prices jumped 300% in the last 5 years in this area. We still have a lot more to go in my opinion.

I would also be wary of foreclosed properties as it generally takes about 6 months to a year for a property to go through that process and during that time, I can assure you they are not spending extra money to keep the place in good shape since they are having a hard time just to keep up with mortgage payments. Expect at least a few thousand in repairs/paint/replacing major appliances to get these places rentable again.

I hope this helps you figure out your plans and good luck! - Tue Jun 24 2008, 13:46

Major 2 Family CO/Certificate of Compliance requirements in Lodi include the following:

Fire extinguishers in both kitchens with a 2A40BC rating or higher.
Smoke and CO detectors in each room and operational.
All rooms and upgrades to the house must have been approved by the city and permits issued at the time of construction.

If you go into the main office, they will give you a packet with all the information. There is a $50 fee for the CO and a $50 fee for the fire inspection. - Tue Jun 24 2008, 12:13