Is Your Rental Unit Heading for Foreclosure? Don't Fret! | Renters ...

With all the foreclosures of the past years and still more coming, many renters get stuck in stressful situations when the mortgage default notices start arriving in the mail. In most states, renters have many rights so that they?re not immediately kicked out or threatened with eviction if they have a valid lease. This means that even if the building you?re renting a unit from is foreclosed upon, you shouldn?t suffer as a result.

However, keep this caveat in mind: Each state, county, or city has different laws and rules related to tenants? rights when the property is foreclosed upon. You need to do some research on the local rules and talk to an attorney about your specific property and situation. Usually, acting responsibly with any new owners and treating them fairly will get the most acceptable outcome to all parties.

But how exactly does a foreclosure come about? Simply put, this happens when your landlord borrows money, such as for a mortgage loan, to buy a property, but then fail to pay that borrowed money back. The bank will then initiate the legal process to recover the mortgage loan?s collateral ? the property ? via the state?s legal process. The bank will advertise the foreclosure sale and eventually, an auctioneer will auction the property at the county courthouse steps. If no one buys the property, the bank becomes the new owner. If your property is ever foreclosed upon, you?ll likely want the bank to end up being the new owner because banks typically are more lenient in dealing with the termination your lease. However, if a private buyer purchases the property at the auction, don?t worry too much. You?ll likely work something out with them in person as new private owners usually show up at tenant doors within a few days to discuss the situation.

So what do you do once the notices start coming in? For one, work hard to keep good communication with your current landlord to try to ascertain the entire situation. Likely, they?ll tell you that everything is fine and that you can keep paying the rent as you normally do. This is the truth, as per your lease, you are still obligated to pay that rent to them, even if you believe they are not using it to pay the mortgage on the building. Regardless, even while you keep up with your rent as usual, start researching and preparing for the inevitable foreclosure.

You can try to track your building?s foreclosure status on ForeclosureRadar , or a local real estate professional may be able to assist. Remember that your current landlord and any new owner cannot necessarily invalidate your current lease or terminate it outside of the written terms you signed with the original owner. However, in some states, the new owner may be able to effectively invalidate your lease, so do some research on the local rules. Also, once you know the property has been sold, don?t send your rent checks to your prior landlord because they no longer own the property.

With the new owner, whether it?s a new private owner or the bank, you need to act responsibly with them and research your rights. If the original mortgage lender, which could be a national bank like Wells Fargo, or Freddie Mac, is the new owner, they property won?t even contact you for several weeks or longer. A bank owner will most likely deal fairly with you and give you plenty of time to move out. In fact, banks will probably pay you some ?cash for keys? to vacate the property. They will contact you via a real estate professional or asset management company.

If the new owner is a private owner, they are going to come to the property in the very near future and try to either negotiate a new lease or negotiate to get you out. Some may even start eviction proceedings to get you out if you fight them. You will have to make the decision on how to handle the situation. You can present them your existing lease and see if they will honor it, but if they do not want to honor it and want you out, work with them to negotiate a fair termination of the lease. That?s likely the best and easiest way for you to move on, as you are not legally allowed to stay for free. Try to get a written commitment for your security deposit back and a reasonable time to vacate the property. If they new owner is not dealing fairly with you, get some professional legal assistance in the process.

There are also scams where groups might contact you and say they are the new owner and ask you to start paying rent to them. In these cases, use extreme caution and have a real estate professional, title company, or lawyer help you sort out who actually owns the property. When in doubt, hold onto your money! Make them prove to you that they own the property before handing them a check.

In conclusion, you have a lot of rights with respect to your tenancy in a rental unit. If the property is foreclosed upon, your best course of action is to research your rights, act sensibly, and deal fairly with any new owner. If things are not going well and you believe that you are not being treated fairly, there is probably a local county housing commission, mediation center, or tenants rights help group that can give you additional assistance and a fair outcome for all parties.

Source: http://www.rentersinsurance.com/2012/02/is-your-rental-unit-heading-for-foreclosure-dont-fret/

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