uh oh...NJ Legislation could be very bad for investors....

There is a bill that is in the works in NJ that will limit what investors can pay for distressed properties, 82% of mkt value. Supposedly, this is very similar to a bill that was passed in NY. If passed, it seems likely that investing in foreclosures in NJ will become non existant. Are there any NY investors who can tell me how this has changed your investing? WHat are you investing in now?

Who determines what market value is? How would this be enforced? Is it 82% of value in as-is condition or 82% of ARV? What a stupid law.

Now explain to me again, why do you guys live there?

I’m not sure who does, but I would guess it will be based on current FMV according to an independent appraiser. Anybody invest in NY? Supposedly very similar there. The problem is that a potential law like this that is intended to help mom and pop, will actually hurt them. Anybody?

I’m from CT, I don’t live in the GarbageGarden State.

The beautiful sunsets, low cost of living and fresh air. :biggrin

None of those sound like the NJ I know. :biggrin

Though Wildwood does sound nice and my g/f wants to go there this summer.

It sounds like those vacant houses will NEVER sell. Who would want to buy them if there is no rehab profit potential?

i dont really understand the legislation. no investors mean more houses will get foreclosed on and more people with ruined credit. a glut of houses that cannot be rehabbed only hurts existing home sales. who wins? supposedly this has happened in new york.

I heard about some foreclosure legislation in NY but didn’t hear anything that sounded like what you are describing. Let me see if I can find anything on it.

I live in NY, never heard anything about this legislation.

It seems the only outcome of this will be that individual investors will be priced out of the foreclosure and reo market, then larger developers can grab the properties in bulk at bigger discounts behind the scenes.

Ahhhh, New Jersey, where the state motto is, “Are you talkin’ to me? I know you’re not talkin’ to me like dat”…!"

I looked at my map…it’s Blue…blue is bad…!


Yes, Keith, in NJ, we all act and talk like the sopranos.

from my states REI Club Website:

Circle the Wagons, They’re-Acomin!

by David Corsi, Past President, MREIA

Throughout the nation, real estate investors are coming under the scrutiny of state legislatures and New Jersey is no exception. There are several bills that have been introduced in Trenton that may severely impact our industry.
In April, Bill A-4068 The “Real Estate Installment Contract Act” was introduced by Assemblyman John Burzichelli. The bill describes real estate installment contracts, stating they must be in writing and disclose any charges, fees or services separate from the purchase price, the principal amount owed, a copy of a loan amortizations schedule showing the due date ,amount of each payment, puts restrictions on the seller to hold or place mortgages on the property and requires the contract to be recorded at the county courthouse.
In May, State Senator Shirley Turner D – Mercer, introduced in the State Senate Bill S-2699: “The Foreclosure Consulting and Anti-Fraud Act.” At the same time, Assemblymen Gary Schaer D – District 36, Neil Cohen D - District 20 and John Burzichelli D - District 3 introduced a sister bill in the State Assembly; Bill A-4214: “The Foreclosure Rescue Fraud Prevention Act.” These bills would greatly curtail an investor’s activities in the pre-foreclosure and distressed sale market. Foreclosure Consultants are defined to include “purchasers of properties in default as well as bankers, mortgage brokers, real estate brokers and agents, etc.

Main points to the Bill include:

  • Distressed Properties are defined as owner-occupied 1-6 family units which are more than 90 days delinquent on any loan secured by the property. The 90 days part can be troublesome. Just one small example: if you are attempting to buy a property in default and pass the 90 day mark without the purchase being completed, a whole new set of rules will take over on the 91st day.
  • Severely restricts purchase-leaseback-option deals. Besides the inherent dangers of this type of strategy from a usury point of view, this bill would allow for punitive damages against the investor.
  • Requires the investor to pay 82% of Fair Market Value for the property. Not to overstate the obvious, but how do you determine what 82 % is, and 82% of what? How is “Fair Market Value” determined? Many properties in foreclosure are in need of major repairs. Is the 82% figure after repair value, or in its current state?
  • The “Stop Foreclosure Consulting” types of businesses will be under the Commissioner of Banking. Distressed property purchasers will be required to have annual audits conducted by an independent auditor, and be required to use certain disclaimers and language in their advertisements and paperwork
  • If any part of the conveyance is found to be in violation of the provisions set forth in this legislation, the transfer may be rescinded by the distressed owner within two years of the date of the transfer! Yes, you read that correctly. Think about the implications. Potentially the deal could be undone up to two years after it was completed. Questions abound: 1. Would you fix up the property within the two year time frame? 2. Can you sell the property within those two years? 3. Would a title insurance company insure good title during (and possibly after) those two years?
  • Violations of the bill’s provisions provide for civil penalties of up to $10,000 for the first offense and $20,000 for each subsequent offense

This small sampling of the contents of these bills point to the obvious. If these bills become law, they will have a chilling effect on the activities of and the profitability of real estate investors, banks, construction trades, property insurance and title insurance companies, etc.
This is just the opening round. As foreclosures increase, and the property tax situation worsens, the state legislators will need to come up with additional revenue and real estate investors will be on their radar. It would not be at all surprising to see the legislature come up with some type of plan that if a property is non-owner occupied, that property would pay higher taxes than similar owner-occupied houses.
The above proposed legislation and concerns about what they will come up with next, shows why it is so important for investors to get involved… A couple of years ago, MREIA was instrumental in fighting legislation that would have required property owners to allow pets in their units. We were successful. but it was only one victory. The battle over individual property rights, the cornerstone of our nation, continues and we can’t let our guard down. Write letters, faxes and emails to your Assemblymen and State Senators. Let them know how you stand on these issues. Should you become aware of any pending legislation that would have an impact on real estate investing please let the leadership of MREIA know about it. And be prepared to circle the wagons.

Yes, I know…I spent a year there one week. The freakin’ unions there are just outta control! We had to adopt specific procedures specifically for NJ/NYC/Philly/etc. to keep from getting the ‘stiff-arm’ from the phone companies…

It is what it is…


Im a member of GSREIA and we’ve been raising money to hire a lobbyist to help fight for our cause. I think all REIA in NJ need to get involve to help stop or create favorable legislation for investors. It’s the whole notion that a few bad apples spoil the bunch and now they want all RE investors to pay.

  I think you need to follow moziah1's lead and get involved politically.  Policy like this has consequences both intended and unintended.  Often times, what these democrats intend to accomplish never gets done, and when the constituency gets tired enough of dealing with all of the fall out from the unintended consequences and votes for someone who actually believes in imperialism and capitalism, the damage is already done.
 This could also be policy set fourth by banks who don't want to share their potential gains from forclosing on properties with small fish investors.  I'd be interested in seeing who wrote this bill, and what kind of work they do, and what kind of political action commitees have the author in their pocket.
 Are mortgage lenders subject to similair mandates with regard to the 90 day delinquincies?
 Stop Foreclosure investors and purchase-leaseback-option deals are sometimes a homeowner's defense against foreclosure, does this legislation introduce any guidelines or mandates for banks or mortgage lenders during the forclosure process?
 Wouldn't placing this kind of activity under the Commissioner of Banks create a conflict of interest?
 I would be interested what two specific organizations think of this legislation:

Office of the Comptroller of the Currency
1301 Mckinney Street, Suite 3450
Houston, TX 77010

Office of Thrift Supervision
1700 G Street NW
Washington, DC 20552
The disclaimer mandate makes sense, but I would think that savvy investors would have attorneys who already thought of that. I really can’t understand why they would introduce this legislation…has anyone in support of this legislation offered examples of the “fraud” that has been occuring in the pre-forclosure investing business?
What a sham…