Lisa and Jim's Northern Nevada Real Estate Blog: We Are Renting and Our Landlord is Having Money Problems ... What Happens to Us?

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, http://www.carsonvalleyland.com/ , 775-781-5472.

Comment balloon 32 commentsLisa Wetzel • December 12 2007 04:36PM

Comments

The tenant will be served as a defendant, once this happens stop paying the landlord

either keep the money or deposit it to the court

Posted by Jeffrey Tumbarello (South West Florida Real Estate Investment Association) almost 11 years ago

The tenant will be served as a defendant, once this happens stop paying the landlord

either keep the money or deposit it to the court

Posted by Jeffrey Tumbarello (South West Florida Real Estate Investment Association) almost 11 years ago
Thanks for bringing this up.  We all kind of forget about the tenants that are affected by foreclosure.  I have had some serious problems with the tenants not cooperating with viewings and open house and really I do see why in some cases because they are victims to the foreclosure crisis too.  Nice post.
Posted by Rosemary Brooks, The Mother & Daughter Realty Team (BMC Real Estate - 209-910-3706) almost 11 years ago

Leases are binding and lessee have to work with lessor to meet obligations of the Lease Agreement. The mortgage issue is the concern of the owner and his/her lender.

Tenants and Landlords should work together by communicating what is happening if there are any issues!

I was always informed that legal advice should/must be made by attorneys and not Realtors.

What a quagmire market this is turning out to be.

 

Posted by Chul KIM McGuire (CorpusTV.com) almost 11 years ago
Lisa this has happened to several renters in my area that I know of.  The renters told me they were paying there rent on time and the landlord wasn't paying the mortgage, they had no idea and were forced to find new housing.  It is a tough situation all the way around.
Posted by The All Pro Team (EXIT Realty Leaders) almost 11 years ago

Great post Lisa.  One thing I do before I place a tenant in a home is I check to see that the owner is not already in trouble.  Another warning sign to look out for is if the owner agrees to take a very low rent if the tenant pays him all in advance. Some landlords are just trying to grab what they can before the bank takes the house.

Posted by Joseph Santini, Luxury Waterfront Expert (Mizner Grande Realty - Boca Raton, Florida Waterfront Expert) almost 11 years ago

C Kim

The foreclosure is an issue to the tenants as most foreclosure complaints also ask for the sheriff to deliver a writ of Possession or whatever document the Local Courts use

it is their problem as well

also most mortgages also carry, a 1 to 4 family rider which has precedence in this as well

Posted by Jeffrey Tumbarello (South West Florida Real Estate Investment Association) almost 11 years ago
Most of the Tenants have no Idea that the landlord is not paying the mortgage.  Its a bad situation. 
Posted by Chad Baird (Re/Max Spirit) almost 11 years ago

Lisa,

This issue is one of the consequences of a slow real estate market, yet seldom addressed. Tenants generally are unaware of the legalities of the situation if the landlord is foreclosed on. Your blog is great advice for them, must read.

Posted by Esko Kiuru almost 11 years ago
great post. As the market continues to change and normalize, there will be a lot of things that people have to look out for to protect themselves, tenants and landlords alike!
Posted by Sean Carroll, Real Estate Speaker and "Expert" Coach (The Get Off Your A$$ Academy) almost 11 years ago
Lisa, this blog has great information. I will be able to pass it along to several people that I knowl.
Posted by Zen Ziejewski, Laguna Niguel Real Estate (Keller Williams Realty) almost 11 years ago
Timely post. I was thinking about this the other day. Thanks for sharing.
Posted by Craig W. Barrett, Hughesville MD Real Estate (RE/MAX 100) almost 11 years ago
The tenants have no rights in a foreclosure process here and aren't notified. Too many times I have had to be the one to tell them. The worst is the landlords that keep taking rent right until the end.
Posted by Christina Bennani-Persechini, Realtor - The House For You (Keller Williams Realty Boston North West) almost 11 years ago
This is a great post.  Wonderful information not only in the post but the comments as well.
Posted by Adam Brett, The Adam and Eric Group, Fullerton's Finest (The Adam and Eric Group) almost 11 years ago
I had a post about this a while ago that was also featured.  I just did a BPO on a property where there were renters.  Surprise!  So I'm helping them start to look for a new place before they find the sheriff at the door.
Posted by Cindy Jones, Pentagon, Fort Belvoir & Quantico Real Estate News (Integrity Real Estate Group) almost 11 years ago
this is a great post. i hope more gen public read this. it may help.
Posted by Trevor Ainsworth, Burlington Vermont Real Estate (Century 21 Jack Associates) almost 11 years ago

Lisa, This is certainly a very important topic. Tenants need to contact an attorney asap if they feel their landlord is in trouble. There are going to be a lot of situations like this next year.

Thanks for bringing this issue to the forefront.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 11 years ago

Lisa, This is certainly a very important topic. Tenants need to contact an attorney asap if they feel their landlord is in trouble. There are going to be a lot of situations like this next year.

Thanks for bringing this issue to the forefront.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) almost 11 years ago
This ia a bad situation where the tenant needs legal advice. I've heard of people knowing they were going into foreclosure rent to new people, accept a deposit and pocket the rent.
Posted by Wayne B. Pruner, Tigard Oregon Homes for Sale, Realtor, GRI (Oregon First) almost 11 years ago

Lisa,

Maybe it's a good idea for new renters to pull tri-merge credit reports on the landlord to make sure they are current and never late on their mortgage.  Would you want to rent from a landlord that has bad credit, 30-day lates and a possible foreclosure?  Things are changing!

 Scott 

 

Posted by Scott Messier almost 11 years ago
It is not fun to watching unsuspecting tenants that are suddenly asked to move out and they have kept the rent up. You are right people do funny things when hey are stressed financially. Thanks for the reminder.
Posted by Terry & Bonnie Westbrook, Westbrook Realty - Grand Rapids Forest Hills MI Re (Westbrook Realty Broker-Owner) almost 11 years ago
This happens quite a bit in Las Vegas (just south of you!)  When I wrote one about this in October I was contacted by a Fannie/Freddie investigator.  They are investigating these as possible mortgage fraud = landlord has incoming receipts and no expenses at the expense of the mtg co.  Like Cindy, I had a BPO that was just the same two weeks ago.  I didn't notify the tenants but I noted it in the BPO.  They (the banks) need to know this stuff!
Posted by Renée Donohue, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) almost 11 years ago

i deal with bank forclosures for 26 years..

all tenant are served by the bank

most tenants live rent free for many months on the back of the forclosure....

many tenant are the reason the landlord is not paying their mortgage

many states take months for eviction

branchlendamerica.com

judith

Posted by judith boggio (Free America Realty) almost 11 years ago

Treatment of the tenant is a state by state thing.  Not all tenants are able to remain in the home of have the rights that others do.  In Nevada tenants are gone in 5 days for non-payment.  There is no long term holdover.  Check the laws in the state that you live in because they can all differ!

 

Posted by Lisa Wetzel almost 11 years ago
This actually happened to a very good friend.  She was in the driveway of the house she was renting and someone drove up and attempted to serve her with foreclosure papers.  What a shock!
Posted by Diane Bell, Hilton Head Real Estate, Bluffton (Charter 1 Real Estate, Hilton Head, Bluffton, SC) almost 11 years ago
I appreciate your bringing up this issue, and 'hope to find out the recourse Maryland tenants have.
Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) almost 11 years ago
This is a tough issue and one that is affecting a lot of people. The renter is unaware. They pay their rent on time, but the home owner is not paying the mortgage.
Posted by Bob & Carolin Benjamin, East Phoenix Arizona Homes (Benjamin Realty LLC) almost 11 years ago
I got a call the other day from a renter in this situation asking me what to do and how to get their deposit back if they were forced to leave early.  I was a little taken aback and unsure what to say.  I had to discuss with my broker what to say before I had some sort of answer to provide.  Thank you for bringing up this subject!
Posted by Jonathan Benya, The Benya Group (The Benya Group) almost 11 years ago
A friend of mine whose uncle was in foreclosure had her collect the money and send it to him. He was out of the country. And yes the tenants knew nothing at all. And yes they had to move and some had children. Unfortunate for them.
Posted by Robert L. Brown, Grand Rapids Real Estate Bellabay Realty, West Mic (www.mrbrownsellsgr.com) almost 11 years ago
This is one of the reasons I am getting into the real estate investment business.  I want to provide a quality home at a good rental price without tenant stress.
Posted by David Slavin, CDPE, ABR, SRES Keller Williams Premier (Keller Williams Premier) almost 11 years ago
I think it would be very interesting for members to research the variety of situations, state by state, that tenants can face.  Secondly, perhaps the rental/lease agreement should contain a clause that addresses this possibility.  Thirdly, should a tenant seek too have the cleaning and security deposit held by a third party, say an escrow account, so that an unscrupulous or desperate owner couldn't spend it.
Posted by Lisa Wetzel, CDPE, SFR carsonvalleyland.com (RE/MAX Realty Affiliates) almost 11 years ago

Thanks, great post. 

Curious to know how many of those 20% rentals that are being foreclosed are due to the fact that the tenant stopped paying the rent?..  

Any thoughts?

 

 

Posted by George Panoff, Your Buyer of Distressed Properties in MD (DBA GR Enterprise) almost 11 years ago

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