Several years ago I purchased a house in Princeton, New Jersey. I got laid off from my job last year and since then I’ve had trouble making my mortgage payments. I fell behind and the bank started a foreclosure. I recently found work, but it doesn’t pay as much as my old job. I don’t want to lose the house. Can I buy it back from the bank after the foreclosure if I can somehow come up with the money?
Yes, New Jersey law permits you to repurchase or “redeem” the home after the foreclosure. You’ll get at least one, and maybe two, opportunities to get the house back following the foreclosure sale. (For general information about redeeming your home after a foreclosure, see Right of Redemption After Foreclosure: Getting Your Home Back.)
Foreclosures in New Jersey are judicial, which means the lender files a lawsuit in court to foreclose your home. After the foreclosure sale, the New Jersey Court Rules provide a 10-day period during which the homeowner may file a motion objecting to the sale. (New Jersey Court Rule 4:65-5.) After the 10-day period, the court must confirm the sale to finalize it.
The New Jersey Supreme Court has determined that foreclosed homeowners get the right to redeem:
New Jersey also provides homeowners with the right to redeem if the lender obtains a deficiency judgment after the foreclosure.
What is a deficiency judgment? A deficiency judgment is a personal judgment against the homeowner for the difference between the total mortgage debt and the foreclosure sale price. Though, in New Jersey, if you dispute the amount of the deficiency, the court may limit the deficiency amount to the difference between the total debt and the fair market value of the property at the time of the sale. (Learn more in Nolo’s article Deficiency Judgments After Foreclosure in New Jersey.)
If the lender gets a deficiency judgment and you want to redeem, you must bring an action for redemption within six months after the judgment is entered. (N.J. Stat. Ann. § 2A:50-4.) However, if you file an answer to the deficiency judgment lawsuit to dispute the amount of the deficiency, you lose the right to redeem. (N.J. Stat. Ann. § 2A:50-5.)
In order to redeem, you must pay the full amount of the judgment, plus interest, costs, and all reasonable expenses that the purchaser incurred for taxes, assessments, other prior liens, and necessary repairs after the sale. (N.J. Stat. Ann. § 2A:50-4.)
You may deduct from this amount any income the purchaser received from the property, like rent.
Rather than counting on redeeming the home, you could catch up on past-due payments before the sale to reinstate the loan. Under New Jersey law you may reinstate by curing the default at any time up until the entry of a final judgment, and judgment can be delayed to allow some extra time to reinstate. Or you could pursue other alternatives to foreclosure if you want to keep your house. For example, you might be able to arrange a mortgage modification, forbearance agreement, or repayment plan.
You could also redeem the home before the sale by paying the full amount of the mortgage debt. (When you redeem prior to the sale, this is known as the “equitable right of redemption.” Learn more general information about the equitable right of redemption.)
If you want to locate the statute that discusses your right to redeem the home after a foreclosure sale in New Jersey, go to Title 2A of the New Jersey Statutes.