New Jerseyans facing foreclosure will have a new path back to homeownership under a bill Gov. Phil Murphy signed Friday.
The new law creates the community wealth preservation program, which will give homeowners facing foreclosure — plus their families and certain nonprofits — the right of first refusal to purchase their home at a sheriff’s sale.
“With today’s bill signing, we are creating a new avenue to homeownership for individuals and families throughout New Jersey, giving many the opportunity to remain in the homes and communities they cherish while also protecting our neighborhoods from rapid investor-driven homebuying,” Murphy said in a statement.
To reclaim a foreclosed home, the homeowner or their family must be preapproved for a loan that matches the home’s original upset price — the lowest price for which a home would be sold — or its final starting upset price, whichever is lower.
The upset price is typically equal to the combined total of any outstanding mortgage on the property, plus interest, fees, and other associated costs.
“This bill is a creative opportunity for families to save their wealth at the time of a foreclosure sale by using financing,” said Sen. Britnee Timberlake (D-Essex), who sponsored the bill as an assemblywoman. “This legislation also levels the playing field for renters, affordable housing nonprofit developers and people who want to purchase an abandoned home to restore and live in or to create affordability.”
Successful bidders must make a deposit equal to 3.5% of their bid amount and would be required to use the home as their primary residence for at least seven years. Those who attempt to sell a home reclaimed under the program within that time period would face a $100,000 fine on their first offense and $500,000 fines on subsequent offenses.
Exemptions in the bill allow homeowners to sell the property within the seven-year period. Those exceptions are generally related to hardship, including the death of a spouse or child, a divorce, or a change in employment, among others.
The bill is in part an effort to slow investor purchases of foreclosed New Jersey homes.
Because investors have financial resources, they can outright purchase homes at a sheriff’s sale and make a profit selling the home at market rate. They can also hold the property as an asset.
“Too often foreclosed properties are bought up by real estate investors and developers only looking to make a profit,” said Sen. Shirley Turner (D-Mercer). “This legislation will help to keep property ownership within the community.”
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