What happens to tenants during a foreclosure?

Question

My wife and I are renting a house and found out our landlord is deliquent on the mortgage + property taxes and currently has a couple liens against the house. He hinted he'll be losing the house at the end of the year. My wife and I are thinking about buying the house, but should we wait and try and talk to his bank to negotiate a better deal? He's currently asking market price to cover all his debts but it will not sell due to the real estate climate in the area. If we wait until the foreclosure happens, will we be evicted? Is there a chance the bank will want to work with us?

Answer 1

It would probably be better for you to work with the bank after the foreclosure sale to get a better price. There are good and bad points about this, though.

First, the bad. You'll have to contact the bank before the sale or very very soon after in order to tell them you're interested in purchasing it. Try and save up for a down payment and get qualified for a loan now, so you can prove to the bank that you are serious about buying the house and not just trying to avoid getting evicted. The bank will have to inspect the house and have it appraised before they accept any offer, so expect them to send out a Realtor or appraiser.

This is assuming the bank buys the property back at the foreclosure auction. This happens almost all of the time, but there's a chance someone else will purchase the house and want to move in. They may be willing to sell it to you for market value, but your great deal will turn into buying a house for full price. It's an outside chance, but worth mentioning.

Good points are the fact that they'll be willing to sell quick and for a small gain on what the bank purchases it for at the sheriff sale. Find out what the selling price was and what the true market value of the property is. Offer something in the middle and back up the offer with a contract and qualification letter.

As long as the bank knows you're working on getting the home and can document the mortgage process, they can hold off on the eviction process. They won't want to pay to evict someone through the court system if you're trying to buy the house.

Answer 2

It depends on the bank but some banks require the tenants or owners (whoever is occupying the property) to vacate within a certain number of days. If you are the tenant, then the bank will communicate this with the owners. If it does go to foreclosure then you definitely have an opportunity to purchase the home. When it hits the pre-foreclosure stage and you have the name of the bank, then talk with them directly or talk with a real estate agent to help you. (If you are the buyer, then you may not have to pay a commission depending on which state you are in.). If it goes to the "auction block", be prepared to put at least 10% down and prove that you can pay the mortgage through a loan approval or through cash funds.

Answer 3

I purchase alot of preforeclosures and if you can get it, do it. Once the foreclosure is filed and there is no way the landlord can get out of it (without coming up with the money), the mortgage company will work with you. They will frequently take less they is owed on the property, since the cost of actually foreclosing is so high to them, and they know they won't recover those costs. Make them a low offer, like 85% of the homes value or 90% of what they owe, whichever is lower. You can prove you can make the payments, since you will probably pay less than what you pay to rent the place.

But be prepared for them to not take a deal (but try and negotiate). Look at other properties in the area to rent, or buy, just to cover all your bases.

Answer 4

I'm no expert, but I believe the bank would be happy to see you after a forclosure. You won't get evicted unless someone else buys the house and wants to use it themselves. Even if they do, however, they'll need to give at least 30 days notice in writing in most, if not all, states. If it's purchased as a rental income property the new owner would have a vested interest in keeping an established tennant, but rent often gets raised in such circumstances. I'd start building a purchase/moving nest egg now to be prepared either way.

My landlady didn't lose her home, but she sold it while I lived there and the new owners took almost two years to get around to asking me to leave so they could renovate and raise the rent. I was paying a pitifully small rent too.

Answer 5

Wait until it goes into pre foreclosure, then he will take lower bids because he will not want a foreclosure on his record. AS far as being evicted, that is up to the bank or the new people who buy the house, but hopefully you will be the people that buy it and you won't have to worry

Answer 6

From what I have heard on the news there is no set way to handle this situation. IF you know your rental is going into foreclosure, go talk to the bank holding the loan and see what they say. Can you stay until the end of the lease? Doubtful. Make sure it is the bank and not the "owner" who is getting your rent because the "owner" does not apparently have an obligation to give them the money and probably never did, hence the foreclosure.

Answer 7

I agree with all of the above answers...however be advised that if you do buy the house while it's in foreclosure you will need to have a "free and clear" title to the home, which means you would be responsible for paying the delinquent taxes at closing.

Answer 8

Absolutely you can be evicted. I'd talk to a real estate attorney in your area to see what your options are as you're interested in purchasing the property.

Answer 9

If you have a lease you should be okay -- just don't expect it to be renewed.

Definitely talk to an attorney.