Wednesday, December 12, 2007

We Are Renting and Our Landlord is Having Money Problems … What Happens to Us?

One of the hidden casualties of the foreclosure crisis are the tenants. When the landlord doesn’t make the mortgage payment and the property sells at a foreclosure sale, most leases are worthless. Statistically, just over 20% of all foreclosures are rental properties. A foreclosure will most often trump a lease – the note and Deed of Trust were in place before the lease agreement was signed. Regardless of how long you’ve rented your home, how early you pay your rent, or how much you have improved the property – if the owner of the house isn’t making the payments you have great exposure of being evicted with very little warning after a foreclosure sale. Note: this does not occur in a conventional sale situation where the Buyer acquires the property subject to your lease terms and conditions.

Some precautions you can take include looking at your owner’s information online at the County Recorder’s site - you can get the name of how they hold title at the County Assessor’s site. If you see a Notice of Default, check the date. You will have approximately 120 days after that date before the property will sell. If you see a Notice of Sale, you have about three weeks. Either way – call your landlord to see if they intend to correct the situation … and how. He should understand that the consequences of his loss will dramatically affect you.

If your landlord is in default you might want to pay your rent into an escrow account and contact an attorney who specializes in foreclosure property issues. Other options: You can file a legal action against the landlord for non-performance on the lease, and try to recover expenses, damages and costs of relocating you incur as a result of the foreclosure. You can also try to contact the new owner (after the foreclosure sale – they likely won’t talk before the sale) and try to negotiate a short-term occupancy offering to protect the property for them while you search for new housing.

Our Advice: Keep an eye out for signs that your owner might be in financial trouble. Are people driving by looking at your house … even stopping to take pictures? Is the property suddenly on the market at a low price? Is your landlord suddenly screening calls? If you have a friend or relative that is renting be sure to share this information with them. Forewarned is forearmed. Imagine finding out one day that you have but three days to get out of your home! You will have to find a place, pack and move … or your belongings could be put on the street. It is a tough situation, but it is legal and real. Of all the proposed mortgage industry crisis solutions none so far have included remedies for non-owner occupied, investor owned, properties. If your landlord is in trouble he had better have resources to solve his problem for there is little chance help will be coming any time soon to stave off an imminent foreclosure.

No matter how good of a relationship you have with your wonderful landlord … desperate people do desperate things. If they are being squeezed financially and it becomes you or his family that will feel the pain … start packing. Be prepared and you will be fine. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, , 775-781-5472.

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