(The Center Square) — New Jersey homeowners who’ve lost their homes to foreclosure will get a first crack at buying their properties at auctions under a bill signed by Gov. Phil Murphy.
The law creates a “community wealth preservation” program that will give homeowners the right of first refusal to re-purchase their foreclosed home at a county sheriff’s sale.
Murphy said the new law creates 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.”
“For too many, the dream of homeownership feels far out of reach,” the Democrat said in a statement.
Murphy conditionally vetoed a similar bill in 2022, saying he supported the goal but had “serious reservations” about the “legality, practicality, and unintended consequences of several of the proposed mechanisms for achieving these goals.”
He dropped that opposition after lawmakers agreed to strip the latest version of the bill of a requirement that the final auction sale price be capped at no higher than 50% of the outstanding mortgage, interest, fees or other costs.
Under the new law, bidders must deposit funds equal to 3.5% of their bid at an auction and must use the property as their primary residence for at least seven years. Owners who sell their homes for the seven-year mark would face fines up to $500,000, but there are exemptions related to hardship, including the death of a spouse or child or loss of employment.
Supporters of the changes say the foreclosure market often favors investment companies that can afford to purchase foreclosed-upon properties and sell them at a profit. They say the new law will help level the playing field, support affordable homeownership and empower those with a vested interest in the community to purchase property.
“Community wealth preservation represents an important way of ensuring affordable housing opportunities remain with the local community, stabilizing neighborhoods, and improving lives, all the while making a variety of other positive impacts that will boost our towns economically and socially and keep them viable for future generations to come,” said Sen. Andrew Zwicker, one of the bill’s primary sponsors.
New Jersey is consistently among the top three states with the highest number of home foreclosures, according to the Murphy administration.
Critics also point out that New Jersey is among a dozen states, plus Washington, D.C., with tax foreclosure laws allowing local governments or investors to seize equity from homeowners who slip into foreclosure on their property after falling behind on taxes.
In December, a group of former homeowners filed a class action lawsuit alleging that New Jersey owes them damages for “unlawful takings” of their homes under tax foreclosure sales that didn’t provide them adequate compensation.
The plaintiffs cited the U.S. Supreme Court’s May ruling in Tyler v. Hennepin County, which determined that a tax foreclosure amounts to an illegal taking when the excess value of the property’s tax delinquency isn’t passed to the former homeowner.
They’ve asked a New Jersey Superior Court judge to rule that a statute that governs the state’s tax foreclosure laws is unconstitutional.