When I started investing in New Jersey real estate, I decided that distressed properties would be my bread and butter. I used a variety of strategies to find leads on cheap old houses in NJ, which then I renovated with the handyman skills I’d developed over several decades as a homeowner and sold for a hefty profit. One of the ways I found leads on distressed properties was through foreclosure and real estate auctions. Buying from a house auction in NJ can be a great way to find cheap investment properties, but there are some drawbacks you should consider as well.
Buying From a House Auction in NJ: The Pros and Cons
Many house auctions in NJ sell distressed properties well below market value, so you may think they’re a surefire way to find a great deal on a foreclosed home. However, these auctions are very popular with investors, who often get into bidding wars and drive up the prices of auction homes. There’s also some added risk involved in purchasing an auction property because you don’t usually have the time or opportunity to inspect the home or do your due diligence to uncover liens and other financial or physical issues.
Still, you may decide the potential reward is worth the risk. To help you weigh the pros and cons, here are some details about three popular house auctions in NJ.
Essex County Sheriff’s Sale
The Essex County Sheriff’s Office holds foreclosure auctions every Tuesday in Newark. You can find details about auction properties on their website, including the address, prior owner, and the approximate upset price (or the sum of all the outstanding taxes, utility charges, and mortgage(s) owed on the property). If you make a winning bid on a property, you must immediately pay a 20% deposit. Then, you have 30 days to pay the balance, although you’ll begin accruing interest on day 11. If you’re not able to pay off the property in full after 30 days, or if you choose to back out of the sale, the property will go back up for auction and you’ll be charged for any related expenses.
Even if you do pay off the property in full by your deadline, you still have to wait for court approval before you can take full possession and start your renovations. Plus, Essex County gives the original homeowner a designated amount of time to pay off their liens and reclaim their property even after an auction has occurred. That means you could tie up a bunch of liquid capital in a project that stalls for weeks or months waiting for court approval, only to have the original homeowner reclaim the property and leave you back at square one.
Max Spann Real Estate & Auction Company
Max Spann Real Estate & Auction company holds house auctions in NJ a couple of times a month. They mostly list high-end residential properties owned by private sellers, though they do occasionally offer government surplus real estate and other distressed properties. Pictures, property details, and maps are available on the Max Spann website, plus they frequently host on-site property previews to allow interested investors a chance to view the property in person. To bid, you need to make a down payment of 10%, plus you’ll need to present a cashier’s check for another $20,000 on the day of the auction. If you win your bid, you’ll also need to pay a “Buyer’s Premium” fee of 8% just for the privilege of winning.
Max Spann doesn’t hold auctions very frequently or have many properties available for auction. They primarily deal in high-end homes and large estates, which aren’t ideal investment properties. That means you’ll pay a high price to bid to win a property auction, which lowers your potential ROI.
Middlesex County Sheriff’s Sale
The Middlesex County Sheriff’s Office holds their foreclosure and bankruptcy auction every Wednesday in New Brunswick. You can find property details, judgment amounts, and Google map links for all their auction properties on their website. If you win a bid on a property, you have to pay a 20% deposit as soon as the sale closes. Then, you have two weeks to pay the balance before you start accruing interest. As in Essex County, if you’re unable or unwilling to pay off the property in full after 30 days, you’ll need to cover the costs to re-auction the home at a later date.
Also, just like at the Essex County Sheriff’s Sale, you’ll need to wait for court approval before you can start your flip. That means you have to pay for the home upfront without any guarantee that you’ll actually be able to do anything with it. You could miss out on other great investments while your money’s tied up in a property that ends up getting reclaimed by the prior owner anyway.
While it’s definitely possible to find NJ real estate leads at house auctions, there is significant hassle and risk involved. If you’re anything like me, you’ll decide the juice isn’t worth the squeeze. Luckily, there’s a better way to get leads on distressed homes in NJ.
A Better Way to Get Leads on Distressed Homes in NJ
I didn’t have much luck following up on leads from house auctions in NJ, so I decided to take a different approach. I knew that the best way to find leads on distressed homes was to have motivated home sellers come to me. That’s why I joined HomeVestors®. As an independently owned and operated franchisee, I get to take advantage of the “We Buy Ugly Houses®” nationally known marketing campaign. Now, I don’t have to waste my time attending foreclosure auctions and fighting in bidding wars, because distressed homeowners reach out to me for help. I get to focus my energy on what I love most—renovating and selling homes in NJ.
Are you looking for an alternative to buying from a house auction in NJ? Reach out to HomeVestors® today!
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