How Does Foreclosure Impact Tenants?
You have been renting a single family home, and have just been notified that your landlord has not been paying his mortgage, and the house will soon be foreclosed. What should you do? Will you suddenly be thrown out on the street?
Not necessarily, but there are some things which you should do — and do immediately.
The letter you received advising you about the pending foreclosure probably came from the lender’s attorney. You should call that lawyer, and ask several questions:
1. when and where will the foreclosure sale take place?
2. can you start making your rent payments to the lender, or putting it in escrow? I suspect your landlord has been collecting your monthly rent, but not paying the mortgage with those funds.
3. if the lender purchases the property at the foreclosure sale, will they allow you to stay in the property? If so, for how long? At a foreclosure sale, it often happens that no one will be interested in purchasing the property. Thus, the lender actually buys back the property and will own it. However, most lenders do not want to be in the real estate ownership business and will want to get rid of the property as soon as possible.
Additionally, are you interested in purchasing the property? At foreclosure sales, it is possible to get a good deal if you are the successful bidder. However, before you go down this path, you must talk with your own attorney. You want to have a title search performed — before the sale takes place. You want to know all about foreclosure sales, and what your rights and obligations will be. Too many people mistakenly believe that they can get a super deal by buying properties at foreclosure sales. This “ain’t necessarily so”.
Finally, you should find out what your state law provides in these circumstances. In some jurisdictions, such as the District of Columbia, if a lender forecloses on property, the owner must vacate the property. However, tenants have (or may have) stronger rights, and will be permitted to stay in the property for a period of time. Additionally, in most states in the United States, a tenant just cannot be thrown out on the street without a Court Order. This means that the new landlord — the successful purchaser at the foreclosure sale — will have to go to Court to seek an eviction Order. This will give you some more time before you have to move.
As an ounce of precaution, however, you may want to start looking for another rental property. And I do not recommend you pay any more rent to your landlord. You should put your rent in escrow with your attorney. I strongly suspect that since your landlord is having financial problems, you probably will not get your security deposit back when you vacate. Thus, you want to protect yourself as soon as possible.
Written by Benny L. Kass on www.RealtyTimes.com Copyright © 2016 Realty Times All Rights Reserved.