By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Foreclosure and Real Estate Attorney
In a previous blog, I discussed with you the process by which a judgment creditor can collect on his or her judgment through the use of the writ of execution. After you have satisfied, or attempted to satisfy, your judgment through the debtor’s personal property, you are then empowered under the writ to sell the debtor’s real property, including any houses the debtor has or any land he or she owns. When the property is sold, the debtor is entitled under case law to a credit against the judgment equal to the fair market value of property purchased by a non-mortgage judgment creditor at a sheriff’s sale. So what happens if there are mortgages burdening the land? J.F. v. S.F., a recent unpublished Appellate Division case, provides a discussion on this issue.
Plaintiff obtained a judgment in the amount of $55,000 against the defendant for various tort claims, and obtained a writ of execution. This led to a sheriff’s sale of defendant’s property, which was burdened by two mortgages. One was for $132,800, and the other was for $75,000. Defendant requested a fair market value hearing to determine the credit he was entitled to under the judgment. The court determined the property was in fair condition, better than the condition described by the plaintiff’s expert and worse than the condition described by the defendant’s expert. It then looked at the expert’s valuations, recalculated the valuations based on adjusted sale prices at the time the property was sold, and utilized the mortgages to determine value. From this, the court determined the fair market value of the property as $207,012.58. It then subtracted the amount due on the two mortgages, which was $199,538.39, and concluded defendant was entitled to a credit of $7,474.19 against the judgment. This method to determine the fair market value was upheld by the Appellate Division on appeal.
What’s fascinating about this case is that at the sheriff’s sale, the property was bought for $100, and the company that bought it paid off the mortgages against the property. Yet, in the court’s analysis, it used the value of the property as determined by experts and then subtracted what was left on the mortgages to be paid to come to its fair market value credit. In the end, it was the equity in the property that the debtor had at the time of the sheriff’s sale that determined the fair market value credit, not how much the property was worth at the sheriff’s sale.
To discuss your NJ Foreclosure and Real Estate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.