Bank Foreclosure on Rental Property: What is a Renter to Do?
If you are a tenant in a rental property, whether it is an office or an apartment or house, you need to be aware of your legal rights when your landlord goes into bank foreclosure.
Is it Riskier to Be a Property Owner or a Renter These Days?
When I was single, I rented apartments because I only needed to sign a lease for one year, and there was much less risk than buying. I was young, wasn't sure of where I wanted to live, and apartment living was a sure thing. Landlords kept apartment buildings for years, so no worries.
However, in the last 5 years, that is no longer true. Renting is as risky or even more risky than buying because landlords are going into foreclosure just like regular property owners, and home owners. When you rent, you may have to fill out a credit application for your landlord, but you also need to check the credit worthiness of your landlord to make sure that you are secure for the time of your lease.
Foreclosure is Affecting All Segments of Society
Many homeowners are in foreclosure due to job loss
The foreclosure crisis in the United States is far from over. Many homeowners are still struggling to stay out of foreclosure because of job loss, or job cutbacks. Employers are still struggling to stay afloat in the economy that is only improving in some areas of the country, and even there at a very slow rate.
In order to stay in business, many employers are still letting go of long time employees, those most likely to own a home, condo, or property, and filling jobs with younger, cheaper, fresh out of college employees.
That means that anyone that is in the upper echelon of pay for their company, needs to be prepared to be let go, even if they have been loyal to their company for many years.
Renters are at Risk Through the Potential Foreclosure of Their Landlords
Prospective tenants should interview their landlords
If you rent the space where you live, then you should also keep whatever you need on hand in case you need to move fairly quickly. Foreclosure is not a quick process, but if your building goes into foreclosure, you may need to move out without a lot of notice.
One of your options is to use your security deposit for rent, because in all likelihood, you will not get it back from the landlord or the bank in this situation, even though they are required to return it to you.
Be aware of your options when you do go to rent from a new landlord. Do some investigation to make sure that their finances are stable. No landlord can continue indefinitely without an optimum amount of tenants, but some are more financially secure than others. Is all of their income based on real estate, or do they have another source of income?
Do Not Make Assumptions Based on Your Neighborhood
Foreclosure is happening everywhere
Foreclosure is happening to the rich as well as ordinary Americans. Do not make assumptions that because you live in a nice neighborhood that it cannot happen to you.
In most cases, foreclosure is due to circumstances beyond the control of the property owner. Be aware of your financial standing, and be prepared for the worst case scenario.
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I'm surprised that landlords get foreclosed. I would have thought that the rental income they got was sufficient to pay the mortgage on the property and prevent foreclosure.
I just got out of a renting situation and one of the reasons I hated renting was that I had little control over this type of thing. I do not like being at the mercy of a landlord! Good points here Paula.
Good to know, Kathy. You are right about each state being different. Most of the foreclosure crisis is being dealt with on the state and local level. Although the federal government is stepping in at the corporate level.
You've brought up some good points. This seems to be happening to more and more people these days.
In CA we have specific rules about renters living in a Foreclosed property....they don't have to move as quick as some think, and even if a homeowner gets foreclosed on if they have a renter in there....they have several months, by law, to move. Renters have more rights than stated, and everyone needs to check on the laws of their individual states. Never let a bank employee tell you you have to move....it doesn't work that way in most states.
That's a good point. There is no real answer other to be cautious, and think before you leap.
So true; no one is safe in this real estate market. It's very strange how renting looks good for so many these days when home ownership used to be the dream.