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In an Article Published in the New Jersey Law Journal, Paige M. Bellino and Stephen McNally expressed their position that a recent change to the Tax Sale Law, N.J.S.A. 54:5-89.1, was detrimental to the interest of property owners who are subject to a tax foreclosure.[1] Specifically, the change in the Statute required prospective purchasers of such properties to establish that the contract price was for fair market value modified from “more   than  nominal consideration.”  The Appellate Division for the first time has addressed the market value requirement in an unpublished decision, NR Deed, LLC v. Henry Rabago, Jennifer Rabago and Mao Properties, LLC, Docket No. A-2315-21.  The decision acknowledged that the owner and buyer’s representation as to the condition of the property is pertinent to the fair market value analysis.

In NR Deed, the Appellate Division affirmed the trial court decision which concluded that the purchaser, Mao Properties, LLC (“Mao”) had paid fair market value.  NR Deed, LLC (“NR”) commenced a tax foreclosure when the owners, Henry and Jennifer Rabago, failed to pay real estate taxes on their property located in Sayreville, New Jersey (the “Property”).  The Rabagos had entered into a contract to sell the Property to Mao for $150,000.00.  Mao filed a motion to vacate the tax foreclosure final judgment, to intervene and to redeem the tax sale certificate.  In support of the claim that the $150,000.00 purchase price was fair market value, the Rabagos and Mao submitted certifications explaining that the Property was in poor condition and in need of repairs.  The Rabagos also stated that they were happy with the purchase price, and they could not afford the repair cost.  Mao agreed to allow the Rabagos and their grandchild to live in the Property until they found a new home while also avoiding foreclosure.  NR argued in opposition that the purchase price was not indicative of the Property’s fair market value. In support of its argument, NR relied, in part, on a Zillow Zestimate for the Property, which reflected the Property’s value at $394,400.  During oral argument before the trial court, NR acknowledged that the Zillow Estimate was not based upon an interior inspection of the Property.  The Trial Judge rejected NR’s valuation estimates based upon Zillow, explaining:

 [m]arket estimates such as those provided by Zillow generally assume a property does not require substantial repairs. Here, however, the Property is in need of substantial repairs and so the Zillow estimate cannot be said to be an accurate reflection of what a buyer with reasonable knowledge of the relevant facts would be willing to pay “under normal market conditions based on all surrounding circumstances.” State v. Silver, 92 N.J. 507, 514 (1983); see also [Est.] of Cohen v. Booth [Computs.], 421 N.J. Super. 134, 150 (App. Div. 2011). 

The trial court also acknowledged the benefit received by the homeowner in avoiding foreclosure while allowing NR to receive the benefit of its bargain – receipt of the full redemption amount.  The Appellate Division, in affirming the trial court, noted the deference to be granted the trial judge in assessing factual findings.  The Appellate Division, relying upon the New Jersey Supreme Court decision Green Knight, LLC v. Calderon, 252 N.J. 265 (2022)[2], expressed that the Tax Sale Law evinces an “evolving attitude toward late investors and its greater interest in providing property owners with the opportunity to salvage or maximize their interests before foreclosure.” Id. 15 A-2315-21 at 274.  The Appellate Division further opined:

While we understand that generally, trial judges are “caution[ed] . . . against fixing market value of real property without the benefit of expert appraisal evidence,” see e.g., Jacobitti v. Jacobitti, 263 N.J. Super. 608, 613 (App. Div. 1993) (citation omitted), we also are persuaded a judge is not precluded from considering reliable evidence of the value of real property absent such expert proofs, id. at 613-614.

The NR Deed decision suggests that the Courts are willing to consider a flexible approach to the fair market value analysis in such a way as to protect the homeowner.  The attorneys at McNally & Bellino stand ready to assist homeowners and buyers when purchasing properties subject to a tax foreclosure.

[1] Revision to the Tax Sale Law; Tragedy for Distressed Homeowners | New Jersey Law Journal.

[2] The McNally & Bellino Firm represented the successful intervenor in the Green Knight decision.

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