short sales in MIchigan (Detroit: 2009, foreclosed, renters)

[johnsonkk]

I doubt he could find a decent renter. Anyone that has decent credit in Michigan is buying greatly reduced houses. It's a buyer's market.

[KMTHO]

Originally Posted by johnsonkk

I doubt he could find a decent renter. Anyone that has decent credit in Michigan is buying greatly reduced houses. It's a buyer's market.

What difference does it make? If they are planning on foreclosing on their house anyway, why not take a shot at renting it out. If you get a "bad" renter who doesn't end up paying 6 months down the road, then you foreclose then. You've just delayed it 6 months. But, if you get good renters in there, then you've saved your credit and your conscious by not foreclosing.

[MTUCache]

Originally Posted by johnsonkk

I doubt he could find a decent renter. Anyone that has decent credit in Michigan is buying greatly reduced houses. It's a buyer's market.

That's a pretty big assumption you're making there, that "poor credit" = "bad renter". Especially in today's economy.

Would it be a risk that the renter may lose their job too? or couldn't afford to make the payment? Of course... but in today's market that could happen even if they had perfect credit.

Right now credit ratings are next to useless. There's highly educated, highly paid people who are just now hitting a rough patch for the first time in their lives, and on the other side there's low-income, poor credit people who are actually pretty secure in their job.

I'm renting out a condo in Michigan (Sterling Heights) right now that I wasn't able to sell to a family that admittedly had a pretty poor credit history (including a bankruptcy). But, he owns his own food business, and as a matter of fact he's honestly doing better than most in Detroit right now. His income is at least somewhat insulated from the worst markets of the economy, and I'm a lot more comfortable with him renting my place than I would be with an automotive engineer, no matter how great their credit score was.

Unless you've already given into the fact that you have to trash your credit to start over, and you don't have any other choice, there's no reason to not at least try to rent out your place... even if it gets trashed and they stop making payments, you're still in the same situation as before, waiting for a bank to let you short-sell or foreclose on it. You're not really risking anything right now by letting someone else help you make your payments on it, even if all it does is give you a few months to get situated in your new town and get approved for your next place.

I'm having a real hard time trying to figure out how everybody got conned into thinking that it's a "buyer's market" right now, just because houses are cheaper than they were a couple of years ago. If people were able to get financing through banks to actually buy anything most of us probably wouldn't even realize we were in a recession. When a couple of engineers (like my wife and I) can't find someone to give us a job, let alone a mortgage for a $200k house, I fail to see how that qualifies as a "buyers" market. Even the truly wealthy, who don't need financing, are holding off on buying right now. There is literally no demand out there. Those transactions that are going through are by people who are basically forced to make those moves. Almost nobody that I've heard of is so confident in their job that they're running around looking for a big, sniny McMansion to upgrade to.

[johnsonkk]

Originally Posted by KMTHO

What difference does it make? If they are planning on foreclosing on their house anyway, why not take a shot at renting it out. If you get a "bad" renter who doesn't end up paying 6 months down the road, then you foreclose then. You've just delayed it 6 months. But, if you get good renters in there, then you've saved your credit and your conscious by not foreclosing.

Couple of points - and I realize that may seem short sighted on my part where all non-home owners are bad renters. However, even if they could get their house rented by quality renters, the rent probably won't cover the cost of the mortgage. With house prices dropping, rental prices have also dropped.

Most mortgages that are going into foreclosure have high percentage of the house value wrapped into the mortgage. When you have mortgages that are 85-110% of the value of the house, the monthly payment is normally going to be higher than what the house will rent. Rent is based on the current market and with so many rentals/houses available (along with a drop in overall property value), rent prices have also come down.

For people that have lost their homes, they are all not 'poor quality renters'. But if they've lost their home and are being forced to move into a rental, they (in general) aren't the best renters either.

Finally, if a house is going into ANY foreclosure, the landlord has a legal obligation to tell the potential renters. Another rental scam is that houses are rented while in foreclosure proceedings and the landlord keeps the rental money without making any mortgage payments. Eventually the home goes into foreclosure, the landlord keeps all the rental money (illegally), and the renters are forced to move.

[MTUCache]

Originally Posted by johnsonkk

Couple of points - and I realize that may seem short sighted on my part where all non-home owners are bad renters...

Umm... yeah... actually that does seem extremely short sighted. If there weren't people who didn't already own a home there would be virtually no rental market at all. By your logic it seems as if you think that any renter must be a bad renter, simply because of the fact that they're renting instead of owning. I definitely must be mis-understanding something you're saying there.

However, even if they could get their house rented by quality renters, the rent probably won't cover the cost of the mortgage. With house prices dropping, rental prices have also dropped.

Most mortgages that are going into foreclosure have high percentage of the house value wrapped into the mortgage. When you have mortgages that are 85-110% of the value of the house, the monthly payment is normally going to be higher than what the house will rent. Rent is based on the current market and with so many rentals/houses available (along with a drop in overall property value), rent prices have also come down.

Of course... but if it comes down to losing $50-100 per month to keep your credit (and hang onto your "investment property" until the market bounces a bit), most people would be willing to do that. I'm doing that right now. No, my renters don't cover all of my expenses (mortgage and association fees), but it's close. Close enough that I'm definitely not going to be foreclosing on the property and trashing my credit voluntarily. Am I hopeful that this arrangement is going to make me money in the long run? Hardly. I'd be extremely happy if it lasted long enough for me to put the house back on the market and get out from under it, but I don't even really expect that. Right now it's just a waiting game until I see what comes next.

For people that have lost their homes, they are all not 'poor quality renters'. But if they've lost their home and are being forced to move into a rental, they (in general) aren't the best renters either.

Again, I'm going to have to disagree with you there. If it comes down to renting to a family who has lost their home or a family who has never owned a home, I'm picking the first nearly every time (as long as they have fixed whatever job-situation caused them to lose their home in the first place). If you're talking about the care that people take with others' homes, I'd think a family who had once taken pride in their home would be FAR more understanding and considerate than a person who had never owned their own place.

Finally, if a house is going into ANY foreclosure, the landlord has a legal obligation to tell the potential renters. Another rental scam is that houses are rented while in foreclosure proceedings and the landlord keeps the rental money without making any mortgage payments. Eventually the home goes into foreclosure, the landlord keeps all the rental money (illegally), and the renters are forced to move.

Yes, of course, going into a rental arrangement with that as a plan would definitely be underhanded... but like I said, as long as your renters come close to covering your expenses this isn't really a danger (provided of course they're getting you their rent on time).

[KMTHO]

You are also forgetting the tax benefits of renting out your home. You get to deduct the mortgage interest, real estate taxes, costs associated with renting out the home AND the yearly depreciation of your home (Purchase Price minus the land price divided by 27.5 years). This is of course against the income that you generate from a rental. You divide the difference between the yearly rental income and the yearly deductions described above by 3, and you roughly have what you will get back in taxes. Often, this offsets the difference between what the house rents for and what the monthly mortgage/taxes are. Depending on the purchase price of your home, this could even put you ahead.

[Wingnatic]

Here's an article posted just today that may be helpful

Troubled owners: 3 warnings about short sales - MSN Real Estate

[johnsonkk]

If the original OP is still reading this thread, I would again caution them against renting MAINLY due to their plans of living in another state. I agree that there are advantages to owning rental properties and that voluntarily losing a few hundred might be worth it in the long run but not while living hundreds of miles away from your rental. ANY cost savings/tax benefits get washed away by having to hire a rental management company to handle the renters and their issues.

Being hundreds of miles from your rented house, how many trips back (which are deductible) will it take to keep your home in good condition? Don't forget you will still need to keep insurance on the house and most mortgages do not allow for the house to be rented. Sure this can be ignored until an attempt to file an insurance claim.

I'm simply providing answers for those that think renting is the best option - which the original OP didn't mention in their first post.

[kellyward268]

Originally Posted by KMTHO

Why don't you rent out your house rather than going through a foreclosure or short sale?

Good Advice...

[kellyward268]

You can also contact legal adviser in your area or you have to contact real estate agent.