Renting SFH: Owner's going through foreclosure (short sale, real estate, renters) - City-Data Forum

DvlsAdvc8 · 08-13-2008, 04:40 PM

So it happened... the owners of the house I'm renting are going through foreclosure. I was suddenly deluged today with letters from bankruptcy lawyers - and sure enough, according to newspaper clipping the house I'm renting is being auctioned Aug 29th 2008. Naturally I had no idea.

Doing my research, it would appear I'm screwed. My understanding is that the new owner doesn't have to honor the lease.

I would appreciate the specific advice of someone knowledgeable of what should be done in this situation and whether I've simply lost my $2400 security deposit. My rent is due on the 1st of September - but I'm sure as hell not paying it if the lease is void.

Thanks for your help.

Flamingo13 · 08-13-2008, 05:26 PM

I'm so sorry to hear - the least the landlord could have done was tell you to give you a chance to find a new place. I hope someone can help you (maybe someone familiar w/landlord-tenant issues on how to get your deposit returned, and possibly something in addition because of not giving you any notice).

Good luck.

car54 · 08-13-2008, 05:47 PM

The Post ran an article about this the other day......

washingtonpost.com

DvlsAdvc8 · 08-14-2008, 12:38 PM

Yeah I saw that. I'm personally amazed that there is this gigantic gap in law that allows renters to be wronged like this.

Right now I'm lining up other places to live, and hoping that the paperwork goes through slowly such that I can get a month or so without rent to make up for my lost deposit.

Interesting thing about this is all the news articles seem to be covering only lower income people this happens to. I make enough money to buy a house myself, but decided houses were over valued in relation to incomes a couple years ago when I moved here. Good thing, the house I'm living in was originally bought for $543,000 in 2005, according to the paper and if recent sales in my neighborhood are any indication, its only worth maybe $430k now. Ouch.

I'm going to go to the auction. I'm curious to see what it goes for. I'm pretty sure the owners owed something in the neighborhood of $520k on it. Sucks for that bank! Sucks for the owners! Sucks for me!

Great situation.

tamitrail · 08-14-2008, 12:44 PM

Someone who is foreclosing is probably not too concerned with following the lease they signed....obviously they have no scruples since they did not even tell you. This is why I dispute people when they say renting a home is better than buying right now.

Just because the home is up for auction doesn't mean it will get sold on the 29th. I don't know if the bank or whoever takes it over will kick you out or not. I think the problem is, if you signed a lease, you cannot stop making payments legally whether the owner is foreclosing or not. You probably need to get a lawyer to get this worked out. If you have a signed lease, I don't think you as a tenant have the right to break it without penalties.

DvlsAdvc8 · 08-14-2008, 12:51 PM

Quote:

Originally Posted by tamitrail

Someone who is foreclosing is probably not too concerned with following the lease they signed....obviously they have no scruples since they did not even tell you. This is why I dispute people when they say renting a home is better than buying right now.

Just because the home is up for auction doesn't mean it will get sold on the 29th. I don't know if the bank or whoever takes it over will kick you out or not. I think the problem is, if you signed a lease, you cannot stop making payments legally whether the owner is foreclosing or not. You probably need to get a lawyer to get this worked out. If you have a signed lease, I don't think you as a tenant have the right to break it without penalties.

According to my research - the bank does not have to honor the lease. If they decide to (rare), they will appoint a receiver of rents and I continue paying. If they do not, then I am not obligated to pay rent... there is no lease. The precedent is "first in time, first in right" - the bank has a right to the house before I do w/ my lease.

That said, everything I'm reading says that it often takes awhile to get paperwork together to kick tennants out; and they cannot do so without a court order.

I still think renting is the better option right now (prices will continue to fall IMO), but in the future I'm going to request the deposit be placed in escrow or something like that.

tamitrail · 08-14-2008, 12:54 PM

But how will you know if they are not honoring the lease when the rent is due on September 1st? You have to pay someone that rent that day.

Edit: I would be interested to know what advice you would be given on the renters or real estate forum.

onevthoki · 08-14-2008, 07:27 PM

I had a similar situation happen to former clients of mine... they secured a rental without my help back in the late summer of 2007. Then this past winter/early spring they found out the home was going through the foreclosure process. I did contact a real estate attorney I know and he basically said they were screwed. The rental was secured through a property management company though, so they continued to make their monthly payments (not sure if it was given to the owner or the bank - and of course there were two mortgages on the home), and luckily they were able to purchase a home this summer before the foreclosure happened (it was postponed three times).

I guess my question would be did you go through a management company or deal directly with the owner? Also, check with your local housing office (through the county or town) or maybe legal aid... maybe you could put your rent in escrow. Just a thought... I am not giving legal advice.

Good luck! And let us know how it turns out.

DvlsAdvc8 · 08-14-2008, 08:37 PM

Quote:

Originally Posted by onevthoki

I had a similar situation happen to former clients of mine... they secured a rental without my help back in the late summer of 2007. Then this past winter/early spring they found out the home was going through the foreclosure process. I did contact a real estate attorney I know and he basically said they were screwed. The rental was secured through a property management company though, so they continued to make their monthly payments (not sure if it was given to the owner or the bank - and of course there were two mortgages on the home), and luckily they were able to purchase a home this summer before the foreclosure happened (it was postponed three times).

I guess my question would be did you go through a management company or deal directly with the owner? Also, check with your local housing office (through the county or town) or maybe legal aid... maybe you could put your rent in escrow. Just a thought... I am not giving legal advice.

Good luck! And let us know how it turns out.

Well, our first lease was through a realtor. Never spoke to the owners. However, for various reasons we still ended up meeting them - and the rent check was written to them every month (they actually live about a block down the street).

Our second lease was for two years at a lower monthly rent, and the owner basically came by and we read and signed the lease. We're now a few months into the second year of the lease.

onevthoki · 08-15-2008, 07:34 AM

You might want to see if they will give you the name of their lender and talk to them directly. Surely they have been speaking with someone at the bank. And if you like the house, maybe you could offer to purchase the home. Ask them what the bottom line is. Basically a short sale but without involving any realtors. It would save the bank money in the long run.