Renting a foreclosed property questions

Hi,

I have kind of an interesting question, that others must be facing. My daughter and her husband recently moved to Oakland, CA, and rented a very nice condo in a reasonably safe area. (not an easy thing to find in Oakland) They planned to stay for at least 3 years, and signed a 1 year rental agrement with the son of the owner. (I have not seen the contract as to the exact terms and signatures)

Now that they have been in it for less than 3 months, it has become clear that the property is in foreclosure, and Bank of America is going to re-posses it, through a third party firm - very soon. Neither the bank, nor the 3rd party firm will tell the renters anything, as they are not part of the loan.

After some more discussions with the son (a realtor), his mother lives in another country, and it seems that no one ever made a payment on the property, at least in part, because it sold to "her" for twice its current value.

We suspect that the son will try to now - re-buy it from the bank at auction for the reduced price, but this is speculation. In the meantime, my daughter and son-in-law are confused about what to do, but are pretty certain of a few things. a) They will never see their deposit b) At some point, they will be forced to move.

A family friend (also a realtor) advised them that they will be kicked out within 90 days, so they should just stop paying rent to the "owner's" son - now.

My wife believes that if the new buyer is not planning to live in the property, then they can legally stay for the duration of the contract. She advised them to keep paying rent so they don't ruin their great credit rating.

Of course, we can hire a real estate lawyer for advice, and probably will, but I was curious what others have experienced.

Thanks

HarryN

Well, just an opinion. Probably should continue paying the rent as agreed. There are things the owner could do to keep the wolf at the door for a year and more. And they might set up a short sale in which the new owner honors the rent contract.

I`m interested in buying a house next to mine. The owners (good freinds of mine) have not made a payment in close to 1 year. I offered them $5000 if they would take my short sale offer to the bank and if the bank accepted it...and if they left the place in good shape.

The home at the peak would have sold for around $140000....they refinaced the home...around the peak...for $130000...(their original mortgage balance was $47000). Before they refiananced their payment was around $600. After the refi it jumped up to around $1250. With the refi money they bought a home in Colombia, (a very nice one!) where the wife is from and paid cash...it is rented out for about $250 (to the wifes brother). So they will come out fine (very very well) as they now have their retirement home and no payment on it.

After I made my offer to them they put a for sale sign in the yard and are hoping for a higher "walk away offer"...$10000 is their hope.

I also suggested that I would rent the home back to them at a reasonable rate...perhaps around $800...about $400 less than their house payment is, if they wished to stay...but doesn`t look like they are interested.

I explained to them that time was working against them at this point...any day the could get papers in the mailbox informing them of a court date concerning the foreclosure . And further that an offer of short sale does not stop it...so the sooner they act the better. They risk getting nothing. But for now greed is leading them to gamble.

Anyway...they just bought a small mobile home...old but nice...near by (using money that they saved by stopping paying their mortgage...they had also stopped making their credit card payments...of around $450 as their credit would be ruined anyway...allowing them to save about $1650 per month) and are moving into it...their lot rent is $370 (over 55 type park).

Last Sunday one of their friends was moving stuff INTO the home...turns out she is seperating from her husband and is renting the home from them for $650 (a bargain) on a month to month bases and understands it may only temporary.

Yesterday (Monday) the owner was there cutting the grass. I asked him how things were going regarding the house. He said they had hired an attorney to persue a principal reduction on the loan...with the real intent being to just by time. But that they were still considering my offer.

My offer to the bank was/is going to be $50,000...add maybe $3000 in closing cost...and the $5000 walk away money...so I would have around $58,000 in it. More than I would like...but my thoughts are since it is right next to me it would be easy to keep my eye on it and maintan it. I would estimate my payment with $25000 down (every thing I have left from the stock market disaster) would be around $400. The home should rent quick for around $800...so $400 profit...figure half that needs to be saved for repairs....$200 actual profit perhaps. Of course my real hope would be that the realestate market goes back up here in Florida.

I already have one rental property a few blocks away...and the rental business is not that great...you can get burned easy. Twice it has happened to me. And I wish I had sold everthing during the peak times and rented myself. Some how I thought Florida would escape the down turn (isn`t this where everyone wants to retire?)...boy was I wrong!

This is a clear case of bargaining in bad faith. The landlord knew the property was in foreclosure, and was likely to be sold long before the duration of the rental contract was up. If they wanted to rent at all, then it should have been on a month to month basis.

Well I don`t think there are any legal grounds for stopping paying the rent...however if the they are forced to move they should be entitled to their deposit back...and moving expenses. It may require a small claims court action. But maybe not...the son might not fight it.

As your wife points out your kids risk a ding to their credit if they just stop paying. The owner may not report it...might not be able to. But you take a chance. Is there a place they would like to move to? Might be able to move ahead of time before the possible credit ding. And they would likely lose their deposit...as it would be they who broke the contract.

You know...on second thought...sorry to be so wishy washy...but the whole thing sound strange to me. The son who is a realtor...should know the market. Things didn`t just fall apart overnight. So I would have to assume the condo was purchased during the peak of course...but that was several years ago. And no payment ever made??? Why don`t you look at the county records...find out for sure who owns the home. And take a good look at the rent agreement. Does it say the son is acting as a representative on behalf of the mother...or did the papers get faxed to the mother to sign and return.

The deposit money is suppose to be held in a escrow account...I use a non-bearing checking account...so I don`t have to get into interest earned on it...it`s the same one I have for them to deposit the rent into (I don`t go knocking on their door to collect). And if I remember right your kids have the right to have a copy of the account showing their deposit money...if they request it. And I`m not sure if one is allowed to keep the deposit in a overseas account.

There was a story in the paper I read some time back that was pretty wild. A guy was breaking into forclosed homes...changing the locks. He stuck "for rent signs up" claimed to be a realtor and drawing up perfectly good looking rent contracts, renting them out at a great price...cash only. LOL As far as I know they never have caught him and he might still be doing it.

Start by finding out who owns the home. You should be able to look it up via the internet.

I learned a little more about the deal today. Apparently, they signed up and moved in prior to any notices of foreclosure being issued, so technically, there is not such a clean way to walk away from the contract. The contract contains a clause that if they move out early, they own the entire year of payments - something they missed the first time they read it. Hard to say how strongly held this clause is.

Were any payments made? - it is not entirely clear, none recently. My daughter found more info on the building on the internet, so she is starting to track it.

As far as moving out ahead of time - the deposit is $ 3 K, so it is not something to just walk away from easily, and frankly, it is quite challenging to find a comparable property with the general location (very short commutes, reasonably nice area, bus pickup in the condo complex)

I have never heard of anyone putting the deposit in an escrow account before. Most landlords try to beat you out of the deposit / cleaning fee / last month rent somehow. Is the escrow account aspect in CA or somewhere else?

Last but not least, it is a multi level building, modest rooms spread out over 4floors. This is not ideal, but it is what is around. I helped them move in, and carrying stuff up 4 flights of stairs is a pain - so they are not in any hurry to move. Like I said - the plan was to stay in it for 3 years.

There are some other funny things about the contract that I heard today, but that is not the main concern - getting evicted is the concern. It seems they would get at least 90 days notice to move out, but it is still a pain.

One interesting question - if a bank repos a house - who do you pay the rent to? The new owner, or the person with the contract?

Real Estate laws in California are currently *very* pro-renter. It can take months and a fair amount of money to evict a renter even if they do not pay the rent and they have to be very careful and do it all by the book.
(Even if they move out, sneak back in at odd hours to care for the two vicious dogs they left behind, it can take months. )
This[/url site is a start and most if not all Court systems in California have S.H.A.R.P. (Self Help Assistance & Referral Program)

As far as I know you can't be evicted just because somebody else buys the property.

They can help you with forms and other information. They are not supposed to give legal advice but the lawyer I talked with after finding out what I was faced with gave me a good bit of information.