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I’m a tenant in a house outside Seattle that is about to be auctioned (in foreclosure). Since the house is worth less than the outstanding mortgage, it almost certainly won’t be purchased and will revert to the bank. Even though my lease gets wiped out after a foreclosure, I live in a City with eviction control, meaning that the bank cannot actually evict me (only a family can evict me if they plan to move in). So, the bank would need to list and show the house while I'm still living in it.
1. Do I have a lot of leverage to get the house relatively inexpensively? Since the bank cannot evict us, they would need to show it while we live here. The new owner, a family, would then need to evict us (a process that takes at least a few months). I have an infant and my wife is 5 months pregnant, so I’m guessing most people who look at the house wouldn’t wish to buy the house and have to evict us. I’m thinking that if I share all this info with the bank it will increase the likelihood that they’d wish to sell it to us in a hurry (and at a discount). Any insight into this?
2. How would the bank compute market value? Last year the house I’m living in was bought by my landlord for $800K (at least that’s what the tax records show). However, there were $300,000 of credits (for repairs) given to the buyer (my landlord), so the effective/real price was $500,000. The owner/landlord never made the repairs. So, arguably the price was $500,000 a year ago. In that time, there has been a termite infestation, the foundation has washed out in part, there has been some roof damage, repeated flea infestations (though we have no animals and it’s all hardwood floors) and the landlord ripped a small room of the rear of the house b/c of mold issues. So, arguably the house should be discounted off of $500,000, to perhaps $375,000 (around $125,000 in repairs that are new problems). The house two down from mine, a complete fixer with a similar square footage, just sold for $375,000. Houses in my neighborhood in good condition generally cost around $650,000 . So, I’m wondering if, the day after the failed auction (before the bank hires a broker), I go to the bank with an offer of $375,000 and estimates on all of the repairs that need to be made (for damage that has occurred since the last sale), whether they will consider this as the market value. That is, will they say to themselves, this property sold a year ago for an effective price of $500K and it’s incurred damage since then, so we should subtract off the damage and come to a price of around $375K (which is supportable since the house next door sold for $375K). Or would all that work on my part (bringing them report and estimates, the sales price of the house next door, etc), not really worth anything b/c they will simply have an appraisal done? Now, in reality, the house we live in is in far better condition than the fixer that sold next door, so if they have an appraisal done I’m guessing it will come in around $450,000 even though all those repairs need to be made. Is it worth my time to do all that work so I can present all that info to the bank or is it very unlikely to yield any benefit? Will they look at the sales price last year and subtract off the new damage or will they do a fresh appraisal? Any insight would be greatly appreciated.
I would check the local real estate laws....because in the state of NY a lease survives everything....the only thing that makes a lease breakable is agreement of the parties to break the lease, death of the tenants, and total loss of the property. Even if the landlord dies, the lease is still alive. I would check with your local Board of Realtors to find out what your state specific law is on leases....most states tend to lean the way NY does.
The bank will sell the home for market value. If the condition of the house is poor, the market value will be lower. The price paid by the previous owner does not have a lot to do with market value. Current (sold within the last six months) sales will probably be used to determine the price.
The bank has better and more comprehensive resources for finding the house's value than anything you would provide them. Your work will support your decision on whether to buy and for how much to offer.
Remember that the people in the bank's foreclosure dept. are professionals who deal with a lot of properties. They know the real estate laws and how to use them to their best advantage. Unless you also are a professional, I would be careful about making any assumptions about how a particular law will affect you.
And, beyond what the last post says (ie: the bank is NOT your friend), that's a whole lot of repairs to be done. Regardless, if it seems a good deal to you, then go for it. good luck
I would check the local real estate laws....because in the state of NY a lease survives everything....the only thing that makes a lease breakable is agreement of the parties to break the lease, death of the tenants, and total loss of the property. Even if the landlord dies, the lease is still alive. I would check with your local Board of Realtors to find out what your state specific law is on leases....most states tend to lean the way NY does.
I don't think so...not in NY or anywhere. Perhaps there are some special provisions in NYC rent control laws etc...but nope I don't think that a lease can survive foreclosure anywhere. Note that you would otherwise create an impossible situation. One faced with foreclosure merely leases the premises under very favorable terms to friends. Thus effectively making foreclosure impossible.
I’m a tenant in a house outside Seattle that is about to be auctioned (in foreclosure). Since the house is worth less than the outstanding mortgage, it almost certainly won’t be purchased and will revert to the bank. Even though my lease gets wiped out after a foreclosure, I live in a City with eviction control, meaning that the bank cannot actually evict me (only a family can evict me if they plan to move in). So, the bank would need to list and show the house while I'm still living in it.
1. Do I have a lot of leverage to get the house relatively inexpensively? Since the bank cannot evict us, they would need to show it while we live here. The new owner, a family, would then need to evict us (a process that takes at least a few months). I have an infant and my wife is 5 months pregnant, so I’m guessing most people who look at the house wouldn’t wish to buy the house and have to evict us. I’m thinking that if I share all this info with the bank it will increase the likelihood that they’d wish to sell it to us in a hurry (and at a discount). Any insight into this?
You have a little bit of leverage. The bank has huge amounts of inertia. Want to bet that your leverage can overcome the banks inertia? Be very careful where you put the pivot point of your lever. It costs the bank say 3.2K per month to simply carry the place less whatever you pay them. Will they notice that ou have stalled them for 6 or 9 months? I doubt it.
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2. How would the bank compute market value? Last year the house I’m living in was bought by my landlord for $800K (at least that’s what the tax records show). However, there were $300,000 of credits (for repairs) given to the buyer (my landlord), so the effective/real price was $500,000. The owner/landlord never made the repairs. So, arguably the price was $500,000 a year ago. In that time, there has been a termite infestation, the foundation has washed out in part, there has been some roof damage, repeated flea infestations (though we have no animals and it’s all hardwood floors) and the landlord ripped a small room of the rear of the house b/c of mold issues. So, arguably the house should be discounted off of $500,000, to perhaps $375,000 (around $125,000 in repairs that are new problems). The house two down from mine, a complete fixer with a similar square footage, just sold for $375,000. Houses in my neighborhood in good condition generally cost around $650,000 . So, I’m wondering if, the day after the failed auction (before the bank hires a broker), I go to the bank with an offer of $375,000 and estimates on all of the repairs that need to be made (for damage that has occurred since the last sale), whether they will consider this as the market value. That is, will they say to themselves, this property sold a year ago for an effective price of $500K and it’s incurred damage since then, so we should subtract off the damage and come to a price of around $375K (which is supportable since the house next door sold for $375K). Or would all that work on my part (bringing them report and estimates, the sales price of the house next door, etc), not really worth anything b/c they will simply have an appraisal done? Now, in reality, the house we live in is in far better condition than the fixer that sold next door, so if they have an appraisal done I’m guessing it will come in around $450,000 even though all those repairs need to be made. Is it worth my time to do all that work so I can present all that info to the bank or is it very unlikely to yield any benefit? Will they look at the sales price last year and subtract off the new damage or will they do a fresh appraisal? Any insight would be greatly appreciated.
Thanks,
Bruce
The bank will do a fresh appraisal. Try and feed what is wrong with the property to the appraiser. If you can't get at him personally post the defects on an easel in the living room.
Make the bank a fair offer at something close to what the place is worth. They may give you a slight discount because you are in possesson and can make the sale difficult. But don't count on it. It is not that you annoy them...they just don't notice you exist.
Be sweetness and light and maybe a little gullible. Let the Bank feel good about the deal...But include the pregnant wife and coming baby. Hell all is fair in war and real estate. If you get a counter that is anyway reasonable...take it.
First off, do you have the funds needed to purchase the house? Are you already approved by a bank for a mortgage?
If I were you, I would call an attorney that specializes in foreclosures and see if he can't speak with the bank attorney. The two of them speak the same language and an attorney would be in the best position to actually get to the right person to start making a deal on your behalf.
And don't think there aren't investors who won't buy the house and not have bad feelings about having to evict you. It's a business to them.
First off, do you have the funds needed to purchase the house? Are you already approved by a bank for a mortgage?
If I were you, I would call an attorney that specializes in foreclosures and see if he can't speak with the bank attorney. The two of them speak the same language and an attorney would be in the best position to actually get to the right person to start making a deal on your behalf.
And don't think there aren't investors who won't buy the house and not have bad feelings about having to evict you. It's a business to them.
East coast and west coast are different. You are reaching well past your knowledge base. If he can't finance it who would be quicker to find out than a bank?
Why would you call an attorney? Who told you the bank has an attorney involved? Again you are presuming eastern customs which don't work in the west.
Investors can't buy the house and evict him. To evict him it has to be an ownner occupant. His lease continues if an investor buys the property. And there are likely to be heavy penalties including getting the lease back if the owner does not occupy for at least a reasonble period.
Thank you all for the posts. It seems, after consulting with a real estate attorney, that the lease will not survive foreclosure but that the bank absolutely cannot evict me. And though an owner-occupier can buy at auction (unlikely) or from the bank, it will take them around 4 months to evict me and if they do so and then move out of the house during the next 3 years for whatever reason, they will be liable to me for actual and punative damages, attorneys fees, etc. The local laws are very protective of tenants in this regard. For this reason, i think my leverage with the bank is rather substantial (who wants to buy a house and face a likely lawsuit, both unlawful detainer and for damages if they move out in the next three years). In any case, we're going to wait around for the bank to retake the proeprty, and we'll see from there. Once they contact us to try to evict us or collect rent, we'll see what kind of deal we can strike with them. We are pre-approved for the price of the house, so perhaps it will move quickly. My attorney says you just don't know what each bank will do in this situation, so we have to wait and see. Any additional insights are appreciated. Thanks again ...
If you really are interested in buying the property, I wouldn't wait until the auction, I'd contact the bank immediately. Don't be over-interested but why wait until the auction? You may be able to negotiate a better price because the bank won't have to list it and won't have to have it sit with no payments being made, etc. for who knows how many months.
As someone said, it depends on the bank. Maybe they have a lot of REOs and are willing to move some, maybe they don't and they want to take their chances on the open market. But you won't know until you jump in.
It won't cost you anything to contact the REO person at the bank and see what can be worked out.
Good luck.
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Thank you for the replies
