NJ Homeowners vs. Flippers: New Law Helps To ‘Level The Playing Field’

ESSEX COUNTY, NJ — Homeowners in New Jersey who are battling foreclosures have gained a powerful new weapon against “flippers” under a new state law.

Gov. Phil Murphy signed A5664/S4240 earlier this month, greenlighting what has been dubbed the Community Wealth Preservation Program.

The new law will make it easier for homeowners, their relatives or nonprofits to buy back properties at sheriff’s foreclosure sales. People who have been preapproved for a loan will have the right of first refusal at the property’s original “upset price” – the absolute minimum that a seller will accept.

Families or homeowners will be able to put down 3.5 percent at the sheriff’s auction, as opposed to the 20 percent deposit usually required. That will help them compete with corporate-backed home “flippers” who want to purchase the properties to resell for profit, advocates say.

Bidders will have to use the property as their primary residence for seven years. They must also receive homebuyer education and counseling through the U.S. Department of Housing and Urban Development.

According to a statement from Murphy’s office, the current foreclosure market favors investment companies that have a financial advantage over private home buyers. The new law helps to “level the playing field.”

“For too many, the dream of homeownership feels far out of reach,” said Murphy, who conditionally vetoed a previous version of the bill in 2022 over the pleas of local housing advocates.

• See Related: Murphy Vetoes NJ Foreclosure Reform Bill, But Leaves Door Open

Supporters of the law, including Sen. Britnee Timberlake (NJ-34), have argued that it will empower families and people planning to live in the community – who deserve a fair shot against corporations trying to make a buck.

Timberlake said that New Jersey is “consistently in the top three in the nation” when it comes to foreclosure rates.

“Our state also has the widest racial wealth gap in the country,” said the senator, who started her campaign for the Community Wealth Preservation Program when she was still a New Jersey Assembly member.

The 34th District includes the towns of Belleville, Bloomfield, East Orange, Glen Ridge, Nutley and Orange.

“Black and Brown wealth is hemorrhaging through the loss of foreclosed property, and the people who live in the community often do not have deep enough pockets to even participate in the foreclosure process,” Timberlake said.

“This legislation also levels the playing field for renters, affordable housing non-profit developers and people who want to purchase an abandoned home to restore and live in or to create affordability,” she added. “This is what equity in systems look like.”

• See Related: New Jersey's Racial Wealth Gap Isn't Getting Better, Study Says
• See Related: NJ Towns, Cities Are Seeing Rise In Corporate Home Buyers: State Report

Several social justice advocates in New Jersey applauded the signing of A5664/S4240. They included:

New Jersey Citizen Action’s Financial Justice Program Director, Beverly Brown Ruggia – “The bill puts the interests and wellbeing of people before corporate real estate interests and protects families and communities from the disruption and devastation caused by foreclosure. The legislation is an important step toward reversing the devastating impact of the great recession and foreclosure crisis on black and brown families in New Jersey. It will help ensure that the chain of generational wealth building through home ownership isn't broken when a family falls on hard times.”

James Williams, Director of Racial Justice Policy at the Fair Share Housing Center – “Providing expanded opportunities for Black and Brown communities to retain wealth through homeownership is vital. Closing the racial wealth gap in New Jersey will require more work, but the Community Wealth Preservation Act will create a desperately needed pathway and is a great step in the right direction.”

Laura Sullivan, Director of the Economic Justice Program at the New Jersey Institute for Social Justice – “This legislation is an important step in addressing New Jersey's racial wealth gap by preserving housing wealth in families and communities rather than turning it over to outside investors. This new policy is especially important in New Jersey where people of color face some of the worst racial wealth disparities and are most vulnerable to foreclosure.”

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