Rent out your Default Property

One way to stabilize the real estate industry is to rent out properties that have been foreclosed on instead of marketing and selling off the large amount of foreclosures. Although this should be a simple no brainer for the banks, banks just don’t get it and they just keep foreclosing on properties, putting them on the market to sell which cuases values to decrease. However, there is a way that Homeowners and the public can take matters into there own hands and for Homeowners where a foreclosure is eminent YOU CAN rent out the property prior to foreclosure.

Homeowners, it’s your property…If you want to rent it out, then RENT IT OUT!

Although a Homeowner is in default, they maintain all of their rights to the property, including the right to rent the property,  up until the title of the property passes to the person or entity whom obtained ownership through a foreclosure. However, it is also required that the Homeowner to provide a complete and accurate disclosure of both the physical and legal condition of the property, this means that the Homeowner must fully disclose to the Tenant that there is a pending foreclosure action.

What happens to the Tenant and Lease after a Foreclosure?

They live in the property as per the terms of the lease. The Protecting Tenants from Foreclosure act of 2009  states that “in the case of any foreclosure on a federally related mortgage loan or on any dwelling or residential real property” that the “successor in interest” (the new owner) must honor the remaining term of a bona fide lease. A lease is considered “bona fide”, as defined in Sec 1484 of the Dodd-Frank Wall Street Reform and Consumer Protections Act if 1) the previous Homeowner, their child, spouse or parent are not the Tenant, 2) the lease is an arms length transaction, 3) the rent is not substantially less than fair market rent for the property.

How does the Homeowner Get paid?

In exchange of prepaid rent from the date of possession to the date of the projected Foreclosure Sale, the Homeowner will not require a security deposit or conduct a credit, background or reference check.

Why would a Tenant do this?

There is a niche market of renters on the market right now with many of the people being former Homeowners who have gone through a foreclosure. In these cases, their credit has been damaged and any “traditional lease” would require a hefty security deposit and down payment. In a default rental transaction, in exchange for the absence of these items, the Tenant will pay the Homeowner  rent from the date the Tenant takes possession to the date of the estimated foreclosure sale.

Getting Started

If you are a homeowner wanting to rent out your property or if you are Tenant interested in renting one of these properties, then please contact brett.