Saving Private Ryan - What If He's a Renter or Tenant
Posted in San Diego Real Estate By Brad Andersohn, Saturday, October 18, 2008.Paul SlayBaugh wrote a post the other day on his Blog regarding foreclosures. I shared this concept as a comment on his Blog, and now want to expand on it a little, and get an Industry opinion.
Paul said, "What many prospective tenants do not realize when shopping for a place to hang their hats for the next year or two is that the new landlord might be on unstable footing. Unable to keep up with mortgage payments and unable to sell, leasing the home is becoming the trendy way to staunch, or at least slow the bleeding for many struggling homeowners."
What about the ones NOT shopping. What about the tenants who are already renting? The ones who have no idea that their Landlord is in default or possible foreclosure proceedings? How do they find out? Does the Landlord tell them? NO! What if it's a lease option, do they lose all there money if foreclosed on? Yes!
How is this possible?
So here was my thought: This may come across as a marketing opportunity, but it's really just an opportunity for some humanitarianism!? What if you were to get a list of Notice of Defaults from your local title company, then inform the non-owner occupied property tenants that their landlords home was in financial distress? Would this open doors for discussion with a potential buyer instead of tenant? Home prices are great, homes are on sale, getting a loan might be a bit tougher, but am I on the right track here?
The issue and problem for these renters and tenants is that they may be moving and they just don't know it yet. When the bank comes knocking on the door and tells them to move, how does this contribute to helping this miss we're in? At least if they knew there were some financial challenges with their landlord early on, they'd have time to prepare, and possibly find a new home to rent, or make a purchase.
Maybe negotiating the possible purchase of the home from owner-to-tenant would be an option as well. Either way, we need to heighten the awareness for these poor tenants who often times have no idea they're about to move whether they like it or not! What we can do to help these individuals? I may be way out of line here, but I sincerely think saving the "Private Ryans" is just as important as trying to save the owners from losing their homes too.
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Submitted by Missy Caulk on October 19, 2008 - 7:42pm.
Brad, we are working with two people right now that this has happened to. Twice now one lady and her family have been notified of foreclosures. In each case she was give 30 days to move.
We are also working with a buyer who had signed a lease and right before she was moving in, the seller told her he had changed his mind and was going to let the house go into foreclosures. Thank goodness.
Missy Caulk
Ann Arbor, MI
Missy@MissyCaulk.com
www.AnnArborRealEstateTalk.com
www.SearchAnnArborHouses.com
Submitted by Anton D. Stetner on October 19, 2008 - 8:07pm.
I have seen this exact thing happen too. However, the landlord never notified the tenant until the last possible second and then didn't give any of the tenants money back because the landlord no longer had any. There needs to be some protections put in place for these tenants. They are currently being left out in the cold.
Anton D. Stetner
Real Estate Solutions Group
Snohomish County Washington Real Estate
Submitted by Tina Merritt on October 20, 2008 - 4:08am.
I'm not sure what can be done to remedy this situation. I assume that the tenant's security deposit is also lost as well since the owner is supposedly broke? Anyone have any ideas on language in leases to help protect the tenants? Would it be ridiculous to ask that the tenant be permitted to verify the mortgage is being paid regularly by the owner? How about requiring a 3rd party to hold the security deposit on owner-managed properties?
Tina in Virginia
Submitted by Kathy Toth and Team on October 20, 2008 - 4:16am.
In our area, we request that a land lord and tenant each have an attorney. We are licensed to sell real estate. We are not rental specialists and they each may need protection. The seller needs protection from Mr and Mrs Satan moving in. The tenant needs protection to have a secure and comfortable home. In the lease, the tenant can ask for proof of monthly mortgage payments made. The third party security deposit could be up for discussion too. info@KathyToth.com
Submitted by Michael Daly on October 20, 2008 - 5:59am.
Kathy - terrific idea!
I will suggest it to all tenants going forward.
Now, we'll probably see why some of the rentals are being offered at "too good to be true" prices.
Michael Daly
The Hamptons Real Estate Blog
Submitted by Missy Caulk on October 20, 2008 - 6:05am.
Great idea to ask for that in the lease.
Missy Caulk
Ann Arbor, MI
Missy@MissyCaulk.com
www.AnnArborRealEstateTalk.com
www.SearchAnnArborHouses.com
Submitted by Brad Andersohn on October 20, 2008 - 7:41am.
Missy - I have a few friends this has happened to, most recently, a private investor named Ryan. Why is he renting? Waiting to get a property and approved for a loan. In the process of looking for home ownership, his neighbor saw that the rental he was in was going through foreclosure.
He would have never known if it weren't for the neighbor. The property was due to be auctioned on the courthouse steps in just two weeks. Can you imagine his surprise? It's horrible that a landlord, the lender, or somebody wouldn't take the time to contact him as a tenant to let him know what was going on.
Turns out the owner wasn't even paying the mortgage with his rent money. This kinda thing is happening everyday all over the Country, something most certainly has do be done about this.
Who's obligation of responsibility is it? Why should the renter be left in the dark the entire time until someone springs on them they have to move?
I feel bad for these folks and wish we could implement new laws to lease options and rental agreements. In the meantime, it might be a great opportunity to be proactive and try to get these folks into a home before disaster strikes.
In our area, the first document filed is a NOD (Notice Of Default) which is public record and can be obtained through the Local Title Companies. With a list of non-owner occupied defaulting properties, an agent could approach this tenant and at least warn them and give them 90 days advance notice to start looking for a new place to live.
Not sure what the law is in contacting the renters about this, but it's obvious there's no laws protecting them in these situations. Sounds like a great farming tool to me, and a way to help people who really need it in the trying times.
Submitted by Brad Andersohn on October 20, 2008 - 7:44am.
Anton - exactly. Do you think instead of waiting for a new law that it might be good to try and approach these individuals to see if they qualify for home ownership?
I know I would appreciate if someone knocked on my door as a renter, and told me that I was about to get kicked out of my house by a bank, and not the landlord. If they could help me relocate into my "Own" home...I'd tell and refer every renter I knew to that agent.
Submitted by Brad Andersohn on October 20, 2008 - 7:47am.
Tina - I like that idea, but what's to keep the landlord from just lying? Does a renter have the right to see that the owner is using their rent to pay the mortgage? I think so, but getting that to be a law and enforceable is probably another story.
I say just go find these renters in defaulted properties, get them pre-qualified, and find them a home of their own.
Submitted by Brad Andersohn on October 20, 2008 - 7:51am.
Kathy - that's great information, thanks for posting that. I wonder how this applies to different states across the Country. Attorneys would certainly have a lot to gain in this market with all the properties going REO or foreclosed on.
I don't think many renters consider getting an attorney just to find a rental, but maybe now they'll understand the value in doing so. Thanks.