How Your Lender Can Take Your House Without A Sheriff Sale

Lenders will try to make up the difference left over when a homeowner defaults on their mortgage loan, and one of the most common ways they do that is through a sheriff’s sale. For traditional foreclosures in New Jersey, lenders typically sell a foreclosed property to the highest bid during a sheriff sale. 

However, a sheriff’s sale isn’t the only way a lender can take your home in New Jersey. Another way that lenders can take possession of your home is through an optional foreclosure, outlined in NJ Rev Stat § 2A:50-63 (2014). Should your lender choose the route of an optional foreclosure, they could take your house without going through the sheriff’s sale process.

The optional foreclosure process is picking up steam in New Jersey, and more and more banks and mortgage servicers are using it to seize homes. Nevertheless, because it is a new process there is not a lot of advice on what a homeowner should do. 

Contact our experienced foreclosure law firm today to speak with our foreclosure defense attorneys who may be able to help. We offer free consultations to help you better understand your situation and what options may be available in your position. 

The NJ Optional Foreclosure Procedure

Lenders are allowed to pursue the NJ optional foreclosure procedure under these circumstances:

  • The homeowner has abandoned the property
  • The homeowner voluntarily surrendered the property
  • The property has no equity

If the lender chooses to pursue an optional foreclosure, the court will file for an order of redemption. The order sets the timeline and amount the homeowner must pay to get their property back.

Homeowners should receive the order of redemption by mail within 20 days of being sent. The order informs homeowners that the lender is proceeding with an optional foreclosure and provides steps that the procedure will take moving forward. You can object to the optional foreclosure and sell your home in a sheriff’s sale, but you have to send a request to the court within 30 days of receiving the order. 

If homeowners fail to send a written request to object to the optional foreclosure within 30 days, then the optional foreclosure will proceed. If you’ve received a notice that your property will be subject to optional foreclosure, contact us immediately—time is not on your side.

What Does It Mean When a Property Has No Equity?

Home equity is the value of a property’s current market value. You can either have positive equity or negative equity and how that’s determined depends on a few factors.

Positive equity happens when the property’s market value is greater than the loan amount you initially received to buy the house. For example, if the loan you got to buy a home was for $200,000 and the current market value of that home is $250,000, you have positive equity of $50,000.

Negative equity, often called an “underwater mortgage,” occurs when the property’s market value is less than what you owe to your mortgage company. If you have no equity, meaning your property’s market value is the same amount as the loan, then you may have fewer options when it comes time for foreclosure. 

Often, one of the options banks will use in underwater mortgages is the optional foreclosure because it’s a faster, more straightforward process for lenders to deal with versus a traditional foreclosure.

Having no equity or negative equity makes it much harder for homeowners to sell their property or refinance should that situation arise. Some homeowners sell their homes after defaulting on their mortgage to avoid foreclosure. Although losing your home is not ideal, it may be the best or only option to stop a foreclosure, optional foreclosure, or a sheriff’s sale, depending on your circumstances.

Suppose you consider selling your home while you are already under foreclosure or to avoid foreclosure altogether. In that case, knowing how much equity your home has is pivotal to getting it sold as quickly as possible.

Talk to an Experienced Foreclosure Defense Attorney Today

Foreclosure is a complicated process and a financial and emotional burden that you shouldn’t have to go through alone. With an experienced and trusted foreclosure defense attorney, you can have peace of mind knowing you have someone on your side helping through the process and fighting for your rights.

Denbeaux & Denbeaux Law has extensive experience in foreclosure defense, and we have made it a mission to help homeowners in New Jersey who are going through the foreclosure process. We defend our clients and their home and seek the best possible outcomes for each unique foreclosure situation.

Set up a free consultation today and learn more about how attorney Joshua Denbeaux may be able to help you.

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