If you've been following real estate in New Jersey recently, one popular topic is foreclosure. It seems to be on the minds of many buyers looking for a great deal, as well as economists concerned about the impact of shadow inventory on the local market, where we have more than 50 months worth of inventory, according to USA Today. Yet, despite the predicted deluge, we haven't seen a lot of bank-owned homes come on the market.
So, what's going on?
What some don't realize is that foreclosure is part of a legal process. If someone chooses not to make mortgage payments, a lender can't simply take a home, but has to go through a prescribed legal process. In New Jersey, that process is lengthy. From conversations with attorneys familiar with the process, it seems to have bottle-necked in the legal system. Apparently, all foreclosures in the state first need to be processed through Trenton, where there are only a limited number of people working on these cases. So, no matter how many there are total, they can only process so many a day. From there, cases go to each county, where there is only one judge per county who is handling these cases. Since New Jersey is cutting back on costs, they aren't going to hire extra people to process these foreclosures any faster.
The irony of all this is that while it'll take longer to get through all the foreclosures in New Jersey, it is actually insulating the impact on local home values. If you're a New Jersey home buyer waiting for the flood of foreclosures, you may be waiting a long time.