When I first started investing in New Jersey real estate, I was as ambitious as the next guy. I tried every tactic I could think of for getting good leads on distressed and undervalued properties. I even attended a couple of auctions. Knowing this, my neighbor, Kelly, approached me about buying auction homes in NJ. He’d started his career in real estate investing about a year ago and had, apparently, been trying everything he could think of to find decent leads too. Except, he hadn’t been to any auctions yet. I told him they’re no picnic, but there are reasons why investors like them. There are also reasons why some of us don’t.
Should You Buy Auction Homes in NJ?
The big question for most local real estate investors is “Where to buy investment property in New Jersey?” For the last year, it’s certainly been Kelly’s. And, at some point, we’ve all wondered if going to an auction might provide the answer. Because the majority of auctions sell distressed homes and price them below market value, they do look like they’d give you the opportunity to buy, renovate, and sell houses that produce good returns.
But, there are some drawbacks to buying auction homes too. Investor competition can be steep, which often drives the price of a property up during bidding. If you get caught up in the bidding frenzy, you could end up paying too much for a property that bites into your profit after the rehab. On the same token, you won’t always have a chance to get a home inspection or perform any due diligence before the property becomes yours. So, if the home has foundation issues, termite damage, liens, or unpaid utilities, they usually become yours to fix—possibly at the cost of your potential profits. Any occupants, whether they’re on the property legally or not, also become your responsibility to remove. This can be more than a hassle; it can be expensive.
Still, there are a few property auctions in the state that you may decide are worth checking out. To help you better determine if you should, three of those auctions are detailed below.
Middlesex County Sheriff’s Sale
The Middlesex County Sheriff’s Sale holds auctions on foreclosed and bankruptcy homes every Wednesday in their New Brunswick office. Property addresses, sale type, and starting bids are easily found on the county’s website. A hefty deposit of 20% is required at the close of the sale, if you’re the highest bidder. The balance is due in two weeks, which is a longer timeline than most auctions. But, if you fail to pay in full on time, you’ll be charged interest. If you fail to pay at all, or don’t comply with other terms of the sale, you’ll also be charged for any expenses related to a second auction of the property and the difference in price if it sells for less than what you bid. And, even if you do everything right, you still have to wait for court approval—which may not happen. I don’t know about you, but paying full price for a property that I may not get to own doesn’t sound like a good deal to me.
Essex County Sheriff’s Sale
Essex County auctions foreclosed homes on Wednesdays at the Sheriff’s Office in Newark. You can find a schedule of properties for sale on their website in addition to other available details, such as whether there could be unpaid taxes or water and sewer charges. Deposits are high at 20% of the purchase price and must be presented at the time of registration. The balance must be paid within 30 days, after which you’ll be penalized with interest. Also, just like in Middlesex County, you become responsible for any associated costs and expenses if you back out of buying and they have to auction the house again at a later date. And, not only could court approval be required, but the property can be redeemed by the original owner for a designated time after the sale. That puts your timeline for renovating and reselling your investment on hold, which can put your potential returns at risk if you’re pushed into the winter months or the market winds shift. If the former owner reclaims the house, then you can kiss your project, and any potential returns, goodbye.
Max Spann Real Estate & Auction Company
Max Spann Real Estate & Auction Company conducts auctions on residential properties owned by private sellers a few times a month. Auctions are held on-site or at a local municipal building and property viewings are often available. Photos, related documents, maps, and the terms of each sale are either listed on their website or are made available for download. A down-payment of 10% is required as a deposit, but so is a cashier’s check for another $20,000 to be presented on the day of the auction. If you win the bid, you’ll also have to pay a Buyer’s Premium fee of 8% of the purchase price for the privilege of winning. Since the auctions happen so infrequently, and because some of the homes are in move-in condition, the high price of winning won’t necessarily yield any returns.
Attending property auctions, no matter where they’re held, can be more of a headache than a cure for expanding your options on finding good deals. But, there is a solution that can put you at an advantage for getting better leads on investment homes and, best of all, it actually finds the motivated sellers of distressed houses and leads them to you.
Take Advantage of Getting Better Leads on Investment Homes
As a young investor, my ambitious nature drove me to take every possible avenue toward finding investment property. And, there were a couple of times that I almost put the cart before the horse, as they say, especially when I attended auctions. I bid on properties that I couldn’t inspect, which turned out to be money pits. Luckily, I never won. But some other poor guy did. And I was at a loss for where to look next for better leads.
When I happened to drive by one of HomeVestors®’ “We Buy Ugly Houses®” billboards, I realized I hadn’t tried everything in the book. So, I gave HomeVestors® a call about becoming an independently owned and operated franchisee. Since that call, HomeVestors®’ marketing and lead generation tools—like those billboards you see everywhere—cause distressed homeowners to call on me for help. With leads in the bag, I can channel my ambitious nature toward something else: buying, renovating, and selling properties.
If you’re an ambitious investor, use it to your advantage. Get better leads so that you can invest in more homes. Call HomeVestors® today!
Each franchise office is independently owned and operated.