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5 New Jersey Foreclosure Myths

By
Real Estate Agent with RE/MAX Tri County

Trulia recently published a good blog in their Reality Check section, titled "5 More Foreclosure Myths - Busted!"  The information is relevant to New Jersey homeowners, so I have included the highlights here.

1.  "Foreclosure Happens Fast.  With unemployment and underemployment still affecting nearly 1 in every 4 Americans, no one is immune from fears that a pink slip might quickly turn into a foreclosure notice.  According to NeighborWorks America, nearly 60% of families seeking foreclosure counseling cited a lost job or cut wages as the reason they were facing foreclosure."  The HAP programs (Home Affordable Programs) of the government have been helpful in extending the foreclosure process for many homeowners.  "Even though the legal process of foreclosure can happen in as few as 6 months in most states, it is currently taking much longer for the average foreclosure to get to completion.  Recently, JP Morgan Chase revealed that their average borrower who loses a home to foreclosure has not made any payments in 14 months nationwide; 22 months in FLorida and 26 months in New York."

2.  Foreclosed Homes offer cloudy title.  Robo-signing scandal problems aside, "Buyers of bank-owned properties in nearly every jurisdiction are protected from later title attacks by foreclosed homeowners by the bona fide purchaser rule, under which courts would prefer to simply award cash damages to be paid by the culpable bank to a wrongfully foreclosed-on homeowner, rather than reversing the sale or ownership to the new, innocent buyer...On the average, bank-owned property purchased with an average mortgage and title insurance, the chances a buyer's title will later be successfully challenged by the foreclosed homeowner on the basis of robo-signing?  Exceedingly slim."

3.  Don't buy now because Shadow Inventory will drive prices down more.  "To the extent that the banks have acknowledged the existence of a pool of homes they own but are not selling, they have expressed that their reasoning for holding the homes off the market is to avoid flooding the market and driving home values down any further.  For that reason, buyers should not expect to see a massive influx of these shadow homes onto the market anytime soon - if ever.  The banks' current modus operandi is that as they sell a home, the replace it with another home in that market - if they sell 50 homes in a town that month, they'll put another 50 on the next.  So, don't hold your breath waiting for a fabulous new flood of homes."

4.  A Foreclosure may not be the Buyer Dream you want.  "Many people think that to get a great value on their home on today's market, it means they must buy a foreclosure.  As a result, the value and other advantages of buying an individually-owned home on today's market are frequently overlooked.  Individual sellers with homes on the market right now are generally quite motivated, and understand that their homes are competing with discounted short sales and foreclosed homes."  They also may offer to complete repairs, help the buyer with points or the down payment, and be flexible in pricing - none of which will be available in a bank-owned purchase transaction.

5.  A Foreclosure will ruin your credit history for years.  "Until recently, the standard wisdom was that 5 years, minimum, would have to have elapsed between the foreclosure and the new home purchase.  Now, though, borrowers can obtain an FHA loan with the low, 3.5 minimum down payment requirement as soon as 3 years following a foreclosure."  This type of loan requires good credit, good debt-income ratio, solid employment, and a down payment.  But, after the foreclosure, if you concentrate on rebuilding your credit rating, you will be able to repurchase a home.

Call or email me with your questions on foreclosure and short sales in Hamilton, NJ and surrounding townships.  I'm experienced in helping both buyers and sellers of distressed properties and will help you weigh your options.

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