If you are a renter and the homeowner you lease from defaults on their mortgage and goes into foreclosure it can be a real pain for you. Renters pay their rent every month and are usually taken by surprise when the landlord/owner informs them that their place is being foreclosed, but more and more this is happening. You think you’re safe from foreclosure and the troubles that come with it when you are a renter, but that is not so. Read on if you are a renter and want to learn more about the process and how you will be affected.
First off, lets get the main questions taken care of first; if you’re a renter in a home or apartment building that is being foreclosed on you are likely to be evicted, you usually don’t have the right stay and the lender who has the mortgage can evict you if you try and stay.
Most People rent because it is easier or cheaper then buying a place of their own. But they must keep in mind, no matter how long they stay in place, it is never truly theirs. You can get angry and frustrated when a foreclosure happens, but you really don’t have any ownership in property and therefore no real rights as it comes with renting and foreclosure. This is the risk that comes with the freedom of renting.
If you have a long term lease don’t you have rights to stay in the property?
Well, that depends on the state you lease in, each one can vary and it’s likely your lease can be canceled in some manner. One way may be due to a clause in most leases that cancels it in the event of a foreclosure. The second is part of property law called, “first in time is first in right.” This means that if you rent a residence, which is subject to a mortgage, the mortgage holder’s interest in the property is above your interest, because it was entered into first.
Owners of rental properties are almost always required by their lender to include the foreclosure clause in their leases. Lenders do this to protect themselves from upset renters, which do not want to give up their rental property and want to stay in it, even if it is being foreclosed. If a building is being foreclosed, most likely the lender is going to try and sell it to get out of foreclosure. Most lenders believe that in a foreclosure sale, a empty building will sell for more than the one that is occupied by tenants.
Being a renter comes with risk that you do not have a secure property and there are many ways leases can be broken if the landlord wants to find a way to do so. Because many tenants of foreclosed buildings are helpless during the foreclosure process, congress may change laws to give the renter some protection.
If your are planning on renting a property be aware of the risk and before you rent do some research on the building and see if it is at high risk or if it’s already in foreclosure. A lot of buildings in some major cities are sitting empty, because the units are being foreclosed on. If you go into a building like this and it feels like a ghost town, you may not want to rent in that particular building. Also check into surrounding buildings nearby where you’re thinking of renting, see how they are doing and if any of them are facing foreclosure.
There is no way to tell for sure if you going to rent from someone who is and possible could be facing foreclosure a couple months down the road. The owner may be trying to get someone in just to try and collect a couple months rent. Maybe try asking them point blank if foreclosure is a possibility and just see how they react, did the question make them nervous, was their any hesitation in their voice.
Do you research and be aware that foreclosure is a reality you may face even if you are a renter. A quick and easy way to check if a property is in foreclosure is to visit the local court house. If your state is a Judicial State, and the mortgage is over 3 months late, you’ll probably find a notice of default filing on the property. You can also check the local newspapers for a notice, for those of you in non judicial states.
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