Selling Poinciana One Property at a Time.: Tenants beware. Your cash may be nothing but trash!!!

Tenants beware. Your cash may be nothing but trash!!!

Danger!!! Possible foreclosure!

Hi folks. I was on the phone early today speaking with a Legal Process Server, you know, the people that serve foreclosure papers. This server, Tammy, was talking to me about her job and how busy she has been, swamped, was the word she used. According to her she has been spending most of her days delivering papers in Poinciana and Davenport FL. 

Poinciana, of course, is my market area and Davenport is an area near Disney World that is predominately short term rental vacation homes. This market has also been hit real hard. With the declining economy, folks are just not spending money on vacation and the owners of these properties, mostly from the UK, are not generating enough income to pay the mortgages. 

I would not want Tammy's job. She said she gets cussed at, screamed at and threatened by homeowners just for doing her job. She also bumps into tenants that are very surprised to hear that even though they have been paying their rent every month, their home is now being foreclosed due to the landlord pocketing the rent instead of making their mortgage payments. This is a HUGE problem in my area. 

A friend of mine is the property manager for a large real estate company in Kissimmee and was telling me how she is spending quite a bit of her time relocating tenants due to foreclosures. 

I can't even imagine how pissed I would be to find out I had to move from my home even though I had been honoring my lease. But what can they do? They have no recourse, as lenders do not have to honor leases, once the property is foreclosed. No eviction process is involved. It is my understanding, that once the property is foreclosed on, the tenant has to move. Not only will they have to move but they can kiss their deposit and any advance rents good bye. Ouch!!!!

Here's an interesting article that will shed some light on what a tenant may be able to do to postpone the inevitable. 

So, what can we as REALTORS® do, to protect tenants, if we are working with them? I think the first thing I would do is research the property. If I see the property was bought in 2005 for $250,000, was on the market for 2 years "for sale" and now is being rented for $900.00 a month, I'd be very, very concerned. This property is probably owned by a "flipper" that "flopped", who is now making a last ditch effort to recoup some money. I believe I would suggest my customer/tenant take a pass on this one. 

Maybe we could have the lease worded so the rent is being paid to an escrow company who is making the mortgage payments on the owner's behalf. It would also make sense to have the security deposit and advance rents paid into escrow as well. Do you have any ideas? 

If you're a tenant, who has just been served, I would contact an Attorney ASAP. This problem is not going to just go away. Be proactive. 

OK that's all I have for you now. Any thoughts? 

 

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Comment balloon 36 commentsBryant Tutas • June 07 2008 04:14PM

Comments

Reserved Parking For "The Lovely Wife"...TLW...ROAR!

Blog Boy...

Is there anything tenants can do to protect themselves against this?

So let me see...They have no ownership rights and can't stop paying rent. Rock and a hard place?

TLW...ROAR!

Posted by "The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW. (President-Tutas Towne Realty, Inc.) about 11 years ago

This appears to be becomming a national problem, especially in areas where short term rentals are popular. 

I don't see any reason for a prospective tenant not to request to see the owners latest mortgage statement.  Let's face it, tenants and home buyers have been paying security deposits and earnest money forever.  In this market of rapidly increasing foreclosures, a tenant has every right to protect themselves from such an avent. 

If a property is managed by a licensed broker or management company, they can easily escrow rents and forward them following current mortage statement.  If I was managing a rental property, I'd surely want to see proof that the mortgage payments were being made. 

I give the above about the same chance of happening as the "snowball in Hell" syndrome.

 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 11 years ago

Bryant, I think your comment for us as buyers agents to do a little research ahead of time on the Landlord's property can save the tenant in the long run. Ridiculously low rents indicate desperate Landlord/Owners and the "let the buyer beware" red flag is out in full force.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) about 11 years ago

BB - when I was a young single mom I had this happen to me.... it turned out great for me.... but I never understood how the landlord could rent the house out that was not his until I was older and figured it all out.... makes you wonder if some of these tennants could buy the home on a short sale?  I think your red flags are pretty right on

Posted by Thesa Chambers, Principal Broker - Licensed in Oregon (Fred Real Estate Group) about 11 years ago

Lenn,

"If a property is managed by a licensed broker or management company, they can easily escrow rents and forward them following current mortgage statement.  If I was managing a rental property, I'd surely want to see proof that the mortgage payments were being made."

I agree completely. However, I was very surprised at the responses I have received when I have asked property managers this question. The response was that they have so many vacant properties it's really not a problem relocating tenants AND they make another upfront commission as they usually keep 50% 65% of the 1st months rent in my area!!! This attitude left me dumbfounded.

Gary, Lower than market rent is a BIG red flag. In my area most of the rental homes are only a couple of years old and were bought with subprime mortgages. That teamed with a 45% decrease in property values is recipe for disaster. This problem is going to get a lot worse. 

Thesa, I think the lenders would be smart to try and work something out with these tenants. Maybe they could let them take over mortgage payments simultaneously with the foreclosure. It seems like that would be a win win situation.

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) about 11 years ago

Hun, they are certainly between a rock and a hard place. It would be an awful situation to be in. BTW you look lovely today:)

Posted by Bryant Tutas, Selling Florida one home at a time (Tutas Towne Realty, Inc and Garden Views Realty, LLC) about 11 years ago

As a real estate agent in a NY vacation area, you are alerting me ahead of time (that judicial foreclosure process takes a while in NY)- avoid offering rentals, unless you are aware of all possibilities. Thank you, on behalf of potential renters. 

Posted by Laurie Mindnich about 11 years ago

I just ran accross someone who was being evicted by the landlady whose home was in foreclosure after living their for only 6 weeks.  Tenant's should find out what the seller's circumstances are before they rent.

Posted by Joe Virnig, No Ordinary Joe (RE/MAX Gold Coast REALTORS, Ventura County, California) about 11 years ago

Joe...

That's part of the problem. How in the world does a tenant find out what the circumstances are? I know in our farm area many of the Flippers Investors are renting their houses in spite of the fact they're being foreclosed on. It's a sad state of affairs. I just don't see a solution.

TLW...ROAR!

Posted by "The Lovely Wife" (Broker Bryantnulls Wife) The One And Only TLW. (President-Tutas Towne Realty, Inc.) about 11 years ago

Don't see a lot of this here, yet. Our understanding is the tenant gets to stay until the lease expires, or get's out beforehand upon agreement and consideration.

About 25% of our CA market '08 sales are REO's. Gonna take some classes about it when in DC.

cheers

Posted by Gary Bolen, CRS - Lake Tahoe Real Estate Information (McCall Realty) about 11 years ago

Here too I have seen and received calls from tenants that claim to have been paying rent on time - only to find out that the landlord is in default. Many tenants are refusing to pay security deposits and advance rent out of this very reality. The idea of escrowing these funds makes sense to me. Lets see how a potential landlord feels about it!

Posted by Aventura | Bal Harbour | Sunny Isles Beach | REALTOR® 786-229-7999 (SIB REALTY, Llc // WaterWayRealty.com) about 11 years ago

That is really rotten.  They have a lease, they paid their rent and they are out in the street.

Posted by Randy Prothero, Hawaii REALTOR, (808) 384-5645 (eXp Realty) about 11 years ago

Bryant,

I don't believe in PA that a foreclosure terminates the lease...that's why most lenders get an 'Assignment of Rents' document signed by mortgagors at closing of non owner occupied properties!

Thanks,   Fran

Posted by Fran Gaspari, "The Title Man" - Title Insurance - PA & NJ (Patriot Land Transfer, Inc.) about 11 years ago

Bryant, I personally think that is a good idea to hold the rent in an escrow company. With my own listings that are for sale or rent I know my clients are current, but not so with other rental clients. We do always warn them but then again you never really know. Not sure it will end for awhile.

Posted by Missy Caulk, Savvy Realtor - Ann Arbor Real Estate (Missy Caulk TEAM) about 11 years ago

This just happened to an acquaintance of mine. It is so sad that we are surrounded by so many horrible people taking advantage. Hiring a lawyer is over $300 per hour and that is just not a cost many can afford when having to find a new place to live.

Posted by Dawn Pratt, East Orlando Real Estate about 11 years ago

This is a good one.  Honestly, I hadn't thought about tenants having to move  because of foreclosures.  That has to be an awful situation to be in.  Thanks for educating on this topic!

Posted by Yvette Smith, Realtor In Williamsburg VA, Homes for Sale (LONG & FOSTER) about 11 years ago

Hi Bryant, this is great information, most do not know the first thing about the process.  They are renting and have no clue anything is about to happen o change their life.  Nice post Bryant.

Posted by Gary White~Grand Rapids Home Selling Pro Call: 616-821-9375, Real Estate Services You can Trust! (Flexit Realty "Flexible Home Selling Solutions") about 11 years ago

BB,

I think this is someting happening all over, we have it here too in SoCal. It happened to one of my clients, they came home and found a notice on the door.

Then another office client has been paying her rent to one of these third-party stop-foreclosure scams, $2,300 a month. So far the trustee's sale keeps getting postponed and they keep paying the rent.

Posted by Lynda Eisenmann, Broker-Owner,CRS,CDPE,GRI,SRES, Brea,CA, Orange Co (Preferred Home Brokers) about 11 years ago

I'll bet a lot of the tenants take their frustration out on the property. It doesn't help them financially though.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) about 11 years ago

This, to me, is one of the problems of this whole mess not many folks are talking about.  Tenants are being taken on a ride they didn't buy a ticket for.  It's a shame that so many are locked out of the housing market but to compound that with having their rent and deposit money go up in smoke is to add insult to injury.  Due diligence on the part of agents helping tenants is a must... as with any client.  Good stuff BB.

Posted by Jesse & Kathy Clifton, Retired (Jesse Clifton & Associates, REALTORS®) about 11 years ago

This makes the lot of tenants so much harder. We don't see much of this around here - at least not now, except perhaps in Yonkers and parts of Peekskill.

Posted by Ruthmarie Hicks (Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605) about 11 years ago

BB, tenants are part of our liquidity crisis.  They need some protection too.  I thought lenn's and your comments were spot on.  And also the comment about TLW.  AJ

Posted by Alan 'AJ' Nisen California Contra Costa Mortgage Officer (A Large Bank in America) about 11 years ago

BB,

Typical of what`s happening throughout the state.

Too bad the landlord/tenant act refuses to address these new issues.

Posted by Scott Daniels Florida Real Estate 2.0. Agents Earn 100% Commission. (Florida List For Less Realty, Inc. Broker/Owner. ) about 11 years ago

Broker Bryant, Let me tell you I think that woman should get hazard pay. I would never want that job. 

Posted by Matthew J Blum - (retired from the business) about 11 years ago

BB - Interesting topic that had never given much thought too. It seems there is no one who escapes the present Real Estate conditions throughout the country. I think Lenn makes a good point in asking the owner to verify they are current on their mortgage.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 11 years ago

Unfortunately it is the one's who can least afford to be booted that suffer in these situations. Good head's up for all of us.

Posted by Gary L. Waters Broker Associate, Bucci Realty, Fifteen Years Experience in Brevard County (Bucci Realty, Inc.) about 11 years ago

Good idea to pay the rent to an escrow that will pay the mortgage, but if I waited on the tenant before paying the mortgage I would have most of my properties in default.

Posted by Rich Kruse (Gryphon USA, Ltd.) about 11 years ago

The response was that they have so many vacant properties it's really not a problem relocating tenants AND they make another upfront commission as they usually keep 50% 65% of the 1st months rent in my area!!! This attitude left me dumbfounded.

I too am dumbfounded!!!  They apparently believe that the inconvenience, angst and confusion of relocating tenants is insignificant.  Tell that to a child who has to change schools. 

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 11 years ago

BB - great post and very enlightening for prospective tenants looking for homes to rent - cavaet emptor or let the tenant beware. You pointed it out that we as Realtors must do dilligence when helping tenants looking for a home to rent. I just hope that a prospective tenant would seek the help of a Realtor in their rental search.

Posted by Petra Norris, Realtor, Lakeland FL Homes for Sale (Lakeland Real Estate Group, Inc.) about 11 years ago

What a sad state of affairs that scenario is.  There are a portion of renters of course who cannot buy a house and to have their deposit tied up (GONE) and try to scrape together the money to rent another house puts such a financial burden on them, for some, a burden that they would have a hard time getting out from under.

I like Thesa's suggestion about offering a short sale to the Tenant.

Posted by Rebecca Levinson, Real Estate Marketing and Online Advertising Consultant (Real Skillz-Clear Marketing for Your Real Estate Vision) about 11 years ago

Before taking on any property management contract, you need to do an online search to make sure there is no lis pendens recorded.  Then in the property management contract and any lease document, there should be something addressing what happens if the property goes into foreclosure.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) about 11 years ago

Because I am in your back yard, I've experienced the same problems, but found a great solution.  This may not work for everyone, but if the rental has been for sale, you can look up in our mls where the house expired.  Click on the imapp button to the left and

It will tell you if there is a lis pendens on the property, give you the atty's name and contact info. 

 

For those with MLS's without this capability, have your title company do a search,

They can find out what the situation is.  This way you can talk to the lender, see if

The buyer can purchase if they want, or at least stay away from renting that property.

 

For those of you who do not use title companies to close, the attorney can do the same thing.  You give them business, so ask them to help you out when you need it.

 

Hope this helps!  Btw, for any of you who are doing short sales, I have a company that will do all the nasty work; Calling lender, staying on hold 45 min, get cut off, then finally

Get someone who has no clue. For those of you who want to do this, my company can handle deals all over the US, so if you want more info on how this works, give me an

Email or phone call and I will explain.

 

 In defense of the lenders, they are just OVERWHELMED and can't handle the case load. 

 

I'm working with a short sale right now, and after MONTHS of going thru this, they told me they hired more people, trained them, and ready to get rid of all these non performing assets.... So they are ‘getting it'.  I think we'll have this issue for at least another 2 years. 

 

Speaking of attys, find one and tell them you'd like to help out with his short sales, etc.

The lenders goal is to SELL the house, so you could get the listing. 

 

Hope this helps!

 

Posted by Paula Bean (A Premier Class Realty) about 11 years ago

That would be a bummer!  Another reason to own vs. renting, huh? ;-)  I know that in Missouri a tenant does have some tenant's rights and that there are some others being considered as part of some federal leglislation, but it would still suck to be in this position.

As far as what you could do to protect yourself if you were considering renting, I like the escrow idea that you proposed.  If the land lord wasn't willing to do that, maybe you could negotiate it into the lease that the landlord provide proof that each monthly payment has been made?

Bob Mitchell

ValueList Real Estate Services, Inc.

Posted by R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham, Bob Mitchell (NMLS#1046286) (Bank of England (NMLS#418481)) about 11 years ago

These days, I believe that a prospective needs to be proactive and inquire into the status of the ownership of the house and the mortgage before signing a lease.

Regards,

 

 

Posted by LLoyd Nichols, SW Florida Homes (Premier Florida Realty of SWFL) about 11 years ago

I agree

Once it forecloses, it is a bit late to ask the Sheriff what happened and why.  This is a very good point for renters.  Proactive- get information-try to weigh out the risk of renting.  Times and people are not what they used to be.

Posted by Allison Stewart, St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904 (St.Cloud Homes ) about 11 years ago

This is such a huge problem here too.  We ask that rents and mortgage payments are all paid through escrow.  I also encourage clients to check for any outstandling liens against the property at the clark county website.  Even a trash or HOA lien can signify that the property owner is in trouble.

Posted by Renée Donohue~Home Photography, Western Michigan Real Estate Photographer (Savvy Home Pix) about 11 years ago

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