In New Jersey a lender can foreclose on property that acted as the collateral for the loan after the loan goes into default. After the lender obtains a final judgment in court, the lender can then begin the foreclosure process.
When a property is foreclosed on, a Sheriff’s sale of the property occurs, except with foreclosures on tax sale certificates or in a strict foreclosure. A Sheriff’s sale is a process wherein the property is placed for public auction and is sold to the highest bidder by the County Sheriff in New Jersey. There are 21 separate counties and county sheriffs in New Jersey. A Sheriff’s sale is a means to pay off the outstanding debt to the lender that has accrued over the life of the loan.
At a Sheriff’s sale, the Sheriff, or Plaintiff must publish notice of the sale and a legal description of the land. In addition to the above requirements, the notice will typically contain conditions to the sale that commonly describe any limitations the property has, including whether it is landlocked, whether it encroaches on a neighboring property, if there are any liens on the property, or if there are any HOA fees associated with the property.
However, a vital practice is to do your own research and conduct a title search of the property prior to placing any bids in case the provided disclosures do not provide all the information you may find important in determining what price you are willing to pay or whether you even want to place a bid at all.
After a Sheriff’s sale in New Jersey, the purchaser will have to place a 20% deposit on the property. Within 30 days of the sale, the purchaser will then have to pay the remaining balance due. Prior to paying the remaining balance, if you have not already done so, it is important to conduct a full title search of the property to disclose any undisclosed liens or restrictions on the property. This is important because once the remaining balance is paid, you can no longer void the bid and get out of the purchase of the property. Once you receive the sheriff’s deed on the property, it becomes yours with defects, if any, in title.
To learn more about how Sheriff sales are conducted in your county, please see below:
Your Right to Relief of a Sheriff’s Sale Bid Under New Jersey Law
Have you recently placed a successful bid on a foreclosed property but then found out information that made you realize the property is not what you expected? Or maybe you found out that prior to commencement of the sale, the prior owner filed for Chapter 13 bankruptcy; in that case, you should immediately receive your deposit back as the sale is illegal.
Under New Jersey law, a court can relieve the purchaser of their bid on equitable grounds. N.J.S.A. 2A:61-16 provides that:
Any purchaser of real estate at any public sale, held by an officer or person mentioned in section 2A:61-1 of this title, except at sales under general execution and actual levy thereunder, or for unpaid taxes or municipal liens, shall be entitled to be relieved from his bid if, before delivery of the deed, he shall satisfy the court by whose authority such sale was made of the existence of any substantial defect in or cloud upon the title of the real estate sold, which would render such title unmarketable, or of the existence of any lien or encumbrance thereon, unless a reasonable description of the estate or interest to be sold, and of the defects in title and liens or encumbrances thereon, with the approximate amount of such liens and encumbrances, if any, be inserted in the notices and advertisements required by law, and in the conditions of sale; but, if the court shall direct any lien or encumbrance not described, and which is due and payable, to be paid out of the proceeds of sale, the purchaser shall not then be relieved by reason of such lien or encumbrance.
Where the lender/foreclosing party does not disclose certain information that may materially affect the property, under New Jersey law, you may be entitled to relief from your bid. As provided by the New Jersey Supreme Court:
Quite independent of statute or rule of court, the Court of Chancery has inherent power to order a sale of mortgaged premises and to control its process directed to that end, and this inherent power of the court has never been doubted. The power of the court to set aside such sale is unquestionable, ‘but its exercise, like all other judicial action, must always rest upon some consideration of justice.’ In Karel v. Davis . . . Justice Heher observed judicial interference is warranted when there is an independent ground for equitable relief, ‘such as fraud accident, surprise, irregularity in the sale, and the like, making confirmation inequitable and unjust to one or more of the parties.’”
Crane v. Bielski, 104 A.2d 651, 654 (N.J. 1954). The Supreme Court of New Jersey in Crane further provides that even when a mistake occurs:
‘a party’s own negligence will not always occasion refusal of relief each instance of negligence must depend to a great extent upon its own circumstances,’ and that in many instances ‘the complaining party has been relieved of the consequences of his mistake of fact, even where it was due to his own clear negligence.’
Crane, 104 A.22d at 347.
What to do in NJ When Needing to Get out of a Bid
If you find yourself in a position where you feel as though you were misled by the disclosures provided prior to sale, as described above, you may be entitled to relief from your bid. Where there are instances of fraud, accident, surprise, or irregularity in the sale, a subsequent purchaser may be able to set aside the bid and have their deposit returned.
For example, in Karel v. Davis, 122 N.J. Eq. 526 (1937), the court found that the purchaser was entitled to relief from their bid. In this case, there was a misunderstanding between the purchaser and their agent, who attended the foreclosure sale, as to what amount the purchaser was willing to pay. As a result, the purchaser’s agent overbid on the property and ended up becoming the successful bidder. Here, the court reasoned, guided by considerations of justice and equity, that due to the excessive amount bid as compared to the appraised value of the property, the purchaser was entitled to relief.
If you find yourself in a situation where you successfully purchased a property at a Sheriff’s sale and due to later learned circumstances wish to vacate the sale, you may be entitled to relief. If you have questions regarding obtaining relief from a Sheriff’s sale, call the NJ law firm of Scura, Wigfield, Heyer, Stevens & Cammarota, LLP for a free consultation.
