Hey everyone, I have a question.  The rental house, me and 4 others live in has been foreclosed upon.  My landlords owe nearly $300,000.  The notice was placed on our door yesterday.  What does this mean?  Will we get kicked out or in some cases will the new owner, (the bank) re-sign us a new lease?  Does my lease become invalidated with the current landlords, so in the event we get kicked out, we can stop making payments? This all came out of nowhere.

Foreclosures? In Michigan? UNPOSSIBLE!

 

My completely uninformed opinion based on some conversations with real estate agents coping with this horrid, horrid housing market: hold on tight to your residence...and your rent check. Your landlord obviously has no right to collect rent on a property he doesn't own, and until the bank signs on as landlord, you literally have nobody to send the money to. Furthermore, I'd be asking for your security deposit back. If the bank has gone to foreclosure, it is clear they've exhausted all other options with your landlord, so until they can get your place into new hands, the bank needs you to protect their investment. I'm guessing that your house will be snatched up by another property company, so until then, enjoy your rent money, and prepare to negotiate a lower rent payment with the new landlords.

 

I'm sure there's a less rosy, more legalistically correct opinion out there, and quite frankly, I can't wait to hear it.

This sounds like it's clearly mismanagement. He must have been using the rent money for things other than his obligations. Yes get your Deposits back asap but i'm sure it's likely you won't get it. Just to cover your own ass i would be looking for a new place.

 

No one can legally stay inside while its going through foreclosure. This is to protect the property from damage.

Banks aren't in the business of being landlords, so my advice is to start looking for a new residence ASAP. Does the notice say that the property has already been forclosured on?

 

Either way they can not put you out in the street. Depending on the laws in MI it could be anywhere from 30-60 days before you need to vacate the property.

http://www.nolo.com/article.cfm/ObjectID/B8CE60DC-0D00-4E6B-8DC71AF1165C89EA/catID/F952FED3-0C94-4431-862E21322CCD72B6/104/138/305/ART/

The notice says btw, the house is going up for public sale on Dec 6th.  I seriously hope we do not get removed from the house, especially with exams coming in the following weeks.

So what you got was the sheriff sale notice, which is intended for the property owner, and which is but another step in the foreclosure process.  The property is a long way from transferring ownership, and you are a long way from needing another place to live.  The owner will most likely file for bankruptcy, which will tie up the property until that step is resolved.  This does not give you the right to stop paying rent, because until the property changes hands, you still have your own legal responsibilities.  If the owner is not maintaining the property, there are probably legal recourses you can take to protect your payments.

Yeah, guys. It looks like it's about time to get a lawyer involved.

 

From a purely practical standpoint, I think you're probably safe through finals. Unless Ann Arbor's real estate market exists in a Logan's Run-like bubble, it's not like the buyer is going to be clearing you out at a moment's notice to flip the house a day later for a massive profit. As I speculated before, it'll probably be another slum lord who will just be happy to have paying tenants in place.

 

 

^ That is good advise.

 

Don't assume that you have a long way to go before you have to vacate the property. You can be evicted with as little as 24 hours notice. Your best bet is to MOVE ASAP and don't look at this as an opportunity for free rent. Important to remember; the laws that are written to protect tenants don't apply to foreclosures.

I'm not sure how it works in Michigan, but I'll let you know how it works in Ohio, particularly the Cincinnati area.  I have personally sold over $25,000,000 worth of bank foreclosure properties in the last few years and deal with this regularly.  Again, what I'm saying is what goes on here in Ohio.

 

1 - The owner being in foreclosure doesn't relieve you of your obligation to pay rent.  Technically the owner could come up with his late fees, payments, refinance or other options which would not interrupt your living situation.  That notice does nothing more than alert you as the occupant as to what is going on.  Having said all that...  I have never seen one tenant continue to pay rent once they find out.  And usually if a property owner is in foreclosure they are not going to spend a dime trying to evict you b/c they're probably low on funds.  The only way you can mess up your credit is if the owner does come after you in court.  If they do that and you go to court as well and claim you were saving your rent for moving expenses, etc. b/c of the foreclosure the judge may just rule in your favor.  I've never even heard of any owner in default taking a tenant to court, but I'm sure it's happened.  I have heard of owners in default collecting rent till the last minute and not telling the tenants.  I recently sold a 3 family in Norwood and the owner was collecting rent right up until a week before the sheriff auction.

 

2 - The bank/mortgage company will NOT let you stay there under any circumstance.  Once it goes to auction, if the bank is the successful bidder, it's over for you living there.  If an investor or whoever else buys it at auction, then you do have a chance of staying if the new owner will allow you to continue renting.  If it is a multi-family or a rental type area that attracts investors and not owner occupieds, then that's the type of buyer that might buy it.  If the bank is the successful bidder, you still have time and might be able to make some money from it (I'll get to that in a minute at #3).  Here's what happens...  in Ohio even after an auction has ended, the former owner has 30 days to redeem the property.  This means they have to come up with what they owe and late fees, etc.  If they do this then it cancels out the winning bidder at the auction.  Once the 30 days are over, then it goes directly to the winning bidder.  If the winning bidder is someone other than the bank, then you have to wait for that individual to close on it.  It's different depending on the county around here.  Usually a new owner has closed on it within 30-45 days of the auction date, since it is rare for someone to redeem a property.  Most get financing lined up or were ready to purchase with cash before bidding so that's how they are ready to close within a few weeks after the 30 day period has ended.  If the auction is on December 6th, then you have until January 6th for the redemption period to end.  If the bank takes it back at auction, then it automatically becomes theirs at the end of those 30 days as long as all stages of the foreclosure, deed were handled properly.  And with the volume of foreclosures around here, I sometimes do not get a property after an auction from the bank for like 3 or 4 months after the redemption period b/c of mistakes made by the foreclosing attorney.  Sometimes I will get them as fast as 2 weeks after.  Lately it has been running 2 months behind or so.  I heavily cut down my volume of foreclosures over the last year b/c I started buying/rehabbing houses with a couple partners, but even with the reduced volume I'm still seeing things operating as they have for the last few years.

 

3 - Like I said in the section above, if an investor buys it you might have a good chance of staying put.  If a bank buys it you will be moving no matter what.  But here's what the bank will do.  They'll send the file to a real estate agent.  Now sometimes I am sent properties up to a year before the bank is ready to sell them for whatever reason.  Most of the time it isn't that long of a wait.  Anyway, the real estate agent or a securing type company will go to the property to see if it is occupied.  If it is, then they report that back to the bank.  The bank at that point will automatically file an eviction, even if you're all boxed up.  They just do it as a "just in case".  The agent or securing company will let you know that the bank has taken the property back in a foreclosure situation (which automatically terminates your previous lease) and they need you to move out.  They will offer you money to move out.  A few years ago it was $500-$750, sometimes $1,000.  This past year I have had my banks pay as much as $2,500 for a tenant to move out and no less than $1,500 in the last year.  They are willing to pay this money b/c it keeps them from having to pay legal fees for the eviction, plus the time lost with a tenant, etc.  The rules to get that check usually state you will leave the place in broom swept condition.  Someone will have to fill out a W9 from the agent to get the check from the bank.  They will most likely require you to move out in a short period of time.  The quicker you move, the more money they'll pay.  If you take a full 30 days, they may just say no b/c at that point they're near the end of the eviction they filed once they found out you were living there.  If you plan ahead, just make sure you are ready to move within 2 weeks of being contacted.  If the agent or securing company give you a hard time, just give them one of those "hey, we're renting, we didn't even know this was going on and we need money to move, etc."  If you are dealing with a normal agent they'll repeat all this info to their bank rep and your payment from them will be higher.  It's called a CFK (cash for keys) situation at the banks.

 

As for your area, I'd call your county sheriff and ask for the department that handles the sheriff sales.  When you get someone from that department on the phone, don't get into a big story with them on the phone, just ask how long a property owner has to redeem their property after the auction date.  Then you'll know if it is 30 days like Ohio or more or less.

 

Here's something that could throw a curve ball into the situation.  And this happens lately on probably over half of my properties...  the owner files bankruptcy at the last minute.  Sometimes literally the morning of the auction it is filed.  If this happens, you're looking at 6-9 months before it can go up for auction again b/c that bankruptcy automatically cancels the sale.  If a sale does happen that day, it will be cancelled b/c of the bankruptcy filing.  Now if the owner of your building does this, he may be attempting to keep the property or he may just be buying time thinking he can collect rents for another 6-9 months after only paying about $600 to file a bankruptcy.  If that happens, you're probably going to have no choice but to pay rent or he'll just evict you.  But at least that gives you another half a year or more to stay there or make plans to move elsewhere.

 

Hope this helps.

I lived in a rental in Royal Oak in 2000. When I found out that the house was in foreclosure, I told the landlord that i wasn't going to be the last month's rent. He was holding my $1000 security deposit and I knew that I wasn't goin to get that back.

Very timely article in today's NY Times about this issue.  Goodluck with the situation Hayward.

 

November 18, 2007

As Owners Feel Mortgage Pain, So Do Renters

By JOHN LELAND

 

LAS VEGAS — In the foreclosure crisis of 2007, thousands of American families are losing their homes without ever missing a payment. They are renters in houses whose owners default on their mortgages — a large but little noticed class of casualties...

 

 

^This just brought us down to a whole new level of suck.