What To Do If Your Rented Home Goes Into Foreclosure

in Renter Life

When the landlord isn’t paying the mortgage payments of your rented home, the property may be foreclosed and you’ll be moving out. It would be unfair and devastating to tenants who are giving regular payments and suddenly get evicted from the building.

Still, a foreclosure occurs when the landlord isn’t paying the monthly dues and maybe not even paying attention to building repairs and replacements. Hence, before you rent the property, do your research and check the landlord’s background to ensure that your tenancy is protected.

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In the event of foreclosure, the tenant is more affected than the homeowner or the landlord since they’ll be looking for places to stay. Fortunately, tenants are protected by specific laws that are available in each community or state. So, if you’re a tenant having this issue with your landlord, be proactive, get help, and know your rights.

Here’s what to do if your rented home goes into foreclosure.

Be Proactive

When the home you’re renting is being foreclosed, the bank will start sending notices to the property. Once the notices are received, communicate immediately with the bank or real estate attorney, and inform them that you’re a tenant in the property. Try to ask your landlord about the situation, the status of the process of foreclosure, and the measures to prevent the foreclosure.

If acted right away, the landlord may stop the foreclosure by settling an agreement with the lender or the bank through a short sales transaction. If a short sale is granted by the lender, the property will be given to the interested buyer that qualifies the short sale requirement. With we-buy-houses companies, such as Avante Home Buyers, selling the house will be fast even without hiring a real estate agent. These companies also buy the property in as-is condition even without repairs.

As a tenant, keep yourself posted with regular updates on the progress of foreclosure. However, if the landlord is uncooperative, you can check the public records to keep track of the process. 

Know Your Rights

The laws on foreclosure differ from state to state, especially for persons renting an apartment or a building. It’s important to understand the specific state and local laws, then enforce the rights of renters during foreclosure. 

These laws will answer the following questions:

  • How soon does the foreclosure take effect?
  • Are there any particular protections for tenants living in a foreclosure property?
  • How much time is given to renters after a foreclosure sale?
  • What is a foreclosure and how long will it last?

Knowing the law prevents you from troubles with the property. It’s best to contact your attorney or hire one to provide you with options and legal measures when enforcing your rights.

Follow Your Lease

The lease is still valid and effective until the foreclosure is completed. The renter is entitled to stay in the property as long as the rent is continuously paid and comply with the terms in the lease agreement. However, a failure in monthly rentals or an act of breach in the contract of the lease allows the landlord to file an eviction against the tenant.

On the other side, the landlord is obliged to continue the lease agreement even if the property is in foreclosure. When the landlord breaches the lease, the tenant has the right to file legal actions to enforce their right.

After the foreclosure sale, the new property owner becomes the new landlord and is required to comply with the terms of the lease. As long as the tenant maintains the monthly dues, then they’re entitled to stay in the property until the lease agreement expires.

Be Prepared

Once the process of foreclosure is completed and the transfer of ownership is valid, then the tenant is required to move out. Usually, a foreclosure will end the lease agreement even if it has still months before expiration. 

Fortunately, the tenant isn’t obliged to leave immediately and will still be given time to transfer. The amount of time left for preparation varies, depending on the state law but, usually, it’s between 1 to 3 months. 

It’s best to start looking for homes earlier to have a smooth transition. Take your things with you so that the new owner doesn’t dispose of or destroy them.

In some cases, the new owner will require you to move out early but may offer you financial assistance. This is referred to as a ‘cash for keys’ agreement, and the amount of money will be used to help pay moving expenses. If you choose to agree with the new owner or the bank, make sure that the understanding is put into writing and signed by all parties.

Get Protected

Foreclosure can be a devastating and stressful experience for homeowners and tenants as well. The best solution varies, depending on the specific situation. It’s better to contact an attorney to inform you of your rights and get protected from local or civil laws in your community.

When your state has a ‘just cause eviction’ or rent control requirements, then you may be protected from foreclosure eviction. These policies limit landlords on the reasons of lease termination or eviction of the tenant. Depending on the local law available in the state, the foreclosure can’t be the sole basis for termination of rental agreement or eviction. If Section 8 Voucher is enforced, contact your real estate attorney and local housing authority.

Protect yourself from scammers or persons claiming as the new property owner and seek documents of ownership. It’s best to check the identity and authority of the person before you allow them to your house, pay the rent, or sign a new lease agreement. Scammers will look for publicly available foreclosure properties and may contact tenants living in the building. These people will falsely demand payments for rent and impose undesirable actions.

When your landlord wasn’t able to pay for mortgage payments, then they may also not be paying utility bills and the utility services may be terminated. When the shut-off notice is sent to your home, you must contact the landlord to avoid water and power interruption. If the landlord is uncooperative, you may contact the utility service provider companies and pay them directly.

Final Thoughts

Renting a foreclosure property can give you a stressful and frustrating experience. Before you settle an agreement with the landlord, take some precautionary measures, like checking the background and integrity in terms of credit records and tenant management. 

The steps mentioned in this article provide ways that may help tenants that are in trouble with foreclosure notices.

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