The call came into our office as a referral. A former client was recommending us to assist her good friend who needed to purchase a home quickly! Now, who doesn't relish that kind of call? I contacted the individual who confirmed that she was indeed ready to buy a home right NOW. However, there were a few issues.
She indicated that she was loosing her home although she didn't own it. She could sense my surprise over the phone and answered my question before I could verbalize it, "You're wondering how I can loose a home I don't even own right?" "Yes," I said, "Please, Explain."
She proceeded to explain that several years ago, they had made an agreement to rent with an option to purchase a great home. The family had enjoyed living there for several years, but recently began to get suspicious notifications. Initially, they didn't understand what was going on. Finally, their landlord called and told them the truth. He was behind on his payments and taxes. He was being foreclosed and had lost the house!
Her family had approximately 30 days to get out. The process had proceeded through the Sherrifs Sale. Talk about shock! And Awe...that anyone could be so crassly insensitive to the plight of a family with school aged children.
But unfortunately, this is actually becoming more common that you might imagine as a result of the Foreclosure Crisis. Many investors who purchased homes to flip them at the height of the real estate market are now over-extended.
In related developments, landlords often took out home equity loans on rental properties which had adjustable rate mortgages. When the rates adjusted...some were unable to keep up with the payments or sell the home. It's one of the unexpected consequences of the Foreclosure debacle that is now wrecking havoc in throughout the rental market in a manner that was unanticipated.
This issue was recently addressed on the Today Show by real estate guru, Barbara Corcoran. (You can watch the short video by clicking this link.) In a revealing interview Cochran talks about how many renters are being caught in the crisis by renting homes which the landlord can no longer afford.
Cochran offers some helpful tips. She advises renters to do the following to avoid the situation altogether OR to figure out if the home you are currently renting is up for grabs by the bank. Here are some of her suggestions:
1. Look at the Records...
- Check the County Clerk's office to see if a Foreclosure Filing has been made on your home. (Some additional advise: If someone comes to knock on your door and tells you that a filing has been made...DOUBLE CHECK with the county. I've heard of situations in which Scam artists have tried to rob people by telling them this lie.)
2. Negotiate With the Lender!
- You might find this surprising as technically the renter does not own the home. However, this is a situation which creates an issue for the bank too. Not only do they have to deal with a delinquent home owner, they have to be concerned about getting their property back and respecting the rights of the renter. Consequently, being proactive as a renter can be mutually beneficial for you and the bank.
- In exchange for an orderly and speedy transfer of the property, renters may be able to negotiate concessions. There's even a name for these deals. It's Called Cash For Keys! In exchange for Leaving the Property, banks may be willing to give money to the renter to leave the property which can be helpful in paying for moving costs or finding another place to stay. Renters may also be able to negotiate more time to stay in the property while the bank works out final foreclosure or re-sale details.
3. Talk to a Lawyer!
- If you can afford to do so, this may be something which might be appropriate to consider. Although, it is unlikely that any funds will be forth coming from a landlord who is broke, a lawyer may be able to wrangle some helpful concessions from the bank.
We are living in extraordinary times. Sometimes, opportunity knocks in a strange way. You may want to re-consider looking at your home purchasing options once again. Interests rates remain low and the housing inventory is great. If you'd like to talk about owning your own home, please contact us at info@auduhomes.com to explore how you can become a home owner and never pay rent again!
Copyright 2007 Audu Real Estate All Rights Reserved
Lola Audu, is the Designated Broker & Owner of Audu Real Estate. Our company specializes in helping people buy and sell homes in the greater Grand Rapids, West Michigan area. You can contact us via e-mail @ info@auduhomes.com or by phone at 616-791-0511. Thanks for visiting our blog. Here are links to some of our most popular posts for you to enjoy!
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I have never understood why anyone would enter into an "rent with option", but, alas, I don't run the world.
I wonder how much "option" money the tenant paid towards their closing or down payment for their "option".
Lola, We've seen this also quite a bit. I quite bothers me that someone would do that to another, but... You would think with all this going on and the cost of apts. being quite high here as well, that I should not have a difficult time renting some of my properties. But I know that I am not alone in this predicament as others have stated the same. I can't tell you how many calls I get from people telling me this same circumstance that you have depicted.
I like the options that you've given some renters at the end. Very nicely done!
Wow, Katerina...that's awful. This is the second time I've heard about something like this in our area this year. Another sign of the times I guess. Thanks for your comment.
Lola,
This is another great informative post for the consumers out there. It also will help to open up the eyes of some Realtors who have no idea. This is a side effect of the foreclosure problem, but is all too real. Thanks for writing about it.
Lola,
All sorts of new twists are coming up in this confusing market. The other opportunity for the tenant might be to see if the bank is willing to sell the house to them, at a discounted price perhaps and a low interest rate. It would likely still save the bank money instead of having to go through the long process of foreclosure etc.