help- being foreclosed on
February 2, 2011 1:58 PM   Subscribe

Help, I'm being foreclosed on...

Okay, well the people that own the house that we are renting are being foreclosed on.

We moved in to a rental in June of last year and have a lease through june of this year. Yesterday we received a notice of default on the house.

I have called the bank's number on the notice and they said that it would take about 3 months before the house goes up for auction.

I have talked to the rental agency and they've never had to deal with this kind of thing before and really were no help.

We are in washington state.

What are my rights? I've looked here:

Is there anything else I need to know, or be aware of?
posted by TheBones to Home & Garden (9 answers total)
Every bank is different - what they will do once the foreclosure goes through is impossible to say. Some banks will be happy to keep you in there as a month-to-month renter even after your lease expires. Others banks will want you out immediately.

Either way, it is a brewing head-ache for you. You are now going to have all sorts of annoying people to deal with, like realtors, bankers, and city officials. You might want to move just to save yourself the head-ache. I mean, once they foreclose, you will definitely have realtors popping in to show the house for sale.

You also might want to see if you can get something out of this. See if the bank will pay you $500 to move - the cost of hiring of mover. Some banks might jump at that as an easy way to get you out. If the bank has to use their legal department to get you out, it will cost them a lot more than $500.
posted by Flood at 2:09 PM on February 2, 2011 [1 favorite]

I'm not sure what rights you have but if you're in King County there are some pro bono legal resources that might be of some help.

I will tell you that one big question is how valuable your tenancy looks to the bank and any potential new property owner. It is certainly feasible for the property to be marketed to a new owner with your tenancy included, because that means the property currently produces income.
posted by bearwife at 2:11 PM on February 2, 2011

The details of the mortgage payment are on the notice. We are paying roughly 1/3 less than their mortgage payments are. It also looks like they found a renter and moved with the specific thought of a strategic foreclosure as it states that they haven't made a payment since a month after we moved in.

We are in western washington, not king county.
posted by TheBones at 2:17 PM on February 2, 2011

Some banks may still want to keep you in there - getting something is better than nothing.

The bank is going to sell the property at a big loss. The valule of your tenancy is not based on the current mortgage payment - it is based on the financial situation of the next owner, and that depends on what the next owner pays for the property.
posted by Flood at 2:30 PM on February 2, 2011

You need legal assistance.

In the mean time, a link here on a site primarily for home owners addresses the concerns of a renter whose owner is being foreclosed upon.[pdf]

It states "a new federal law, The Protecting Tenants at Foreclosure Act of 2009, requires the new owner to notify you at least 90 days before evicting you. You must still comply with the obligations of your lease or rental agreement during this time period."

From a read of that (and based on everything I know) it looks like you should continue making your payments as you have been but keep an eye on the foreclosure process. This is where some legal help would be a big win - you don't want to pay these folks for one minute of rent past when the foreclosure goes through. I'd say your chances of every getting any overpayment back from them in nigh zip.

Note in the above PDF that the management company works for your current landlord and does not immediately become beholden to the new owner post-foreclosure. So you cannot count on them not taking and cashing your check just because the sale has gone through.

I'd also look into the state of your security deposit. Is it being handled by your rental management company or is it in the hands of your landlords themselves? If it is you probably want to investigate if you have any grounds to hold the payments in escrow against the possibility they don't pay you back. No idea if that's at all a possibility in WA law but you don't want to get screwed here.

Good luck. It looks like, if that timetable is right, that you're probably okay through the end of your lease.
posted by phearlez at 3:06 PM on February 2, 2011 [1 favorite]

You should consult with an attorney. There's a whole mess of issues, including the security deposit, the transition, and negotiation of move-out costs if the bank wants/needs you out.

If property sales are slow where you are, then the bank may keep you because it may minimize risk of damage to the property and squatters. You might have the opportunity to arrange a decreased rent for month to month (the lease is worth less to you because now you lack security).

The attorney should be worth the money to find out how to handle the rent situation, specifically, if you're entitled to withhold any of it as damages on your breached lease agreement with the prior owner to offset the cost of having to move and the arguably diminished value of your leasehold.

In my geographic location, I was able to get the renters of the quad next to my apartment a deal--the bank paid them each $3k to clean their units thoroughly and so they could vacate on a timetable that worked for everyone.
posted by Hylas at 3:59 PM on February 2, 2011

Start with visiting, while it is a resource for homeowners being forclosed on, it also has rental information and tenant information.

Foreclosures take typically no less than 90 days from the noticed of default, then a trustee sale is scheduled, which takes 2 weeks to 3 months. Then after the house is sold, you would likely be contacted by the new owners of the property, often this begins *your* actual timeline for leaving the joint unless the existing owner actively tries to get you out of the property....aka they have the deed.

You are at the notice of default state, the borrower has I believe 30 days to cure the default, then the 90 day period kicks off.

You've got time, and to be honest I really don't think you have a lot to worry about. Your landlord is not going to go through the eviction process because it costs them money, banks aren't being nice with short sales or deed in lieu agreements and you have tentants rights after ownership of the property is conveyed to someone else. They'd have to adhere to the statutes that govern tenants rights locally and then if you didn't leave, go through the eviction process which is expensive and costs them money.

It is far more likely that you will eventually be contacted and offered an incentive to vacate the property by the landlord, or bank/future owner representative. I don't see this happening before June just based on the volume of foreclosures and the basic process itself.

You will continue to get notices of default and notices of sale posted, as well as occasional visits to the property by the banks representatives to insure that it is still occupied. An unoccupied property is a hazard to their already (generally speaking) lower value loan collateral.

You have time, don't panic. If you are worried speak to a local tenants rights group or if you are REALLY worried talk to a real estate attorney.
posted by iamabot at 4:58 PM on February 2, 2011 [1 favorite]

I was in a similar situation a few years ago at the beginning of the crisis, it's become a lot more common these days. You need to make sure your deposit is protected. If you are dealing with a management company (i.e., not the owner directly) that's probably a lot easier. You should be prepared that they will likely require you to continue paying rent even though the mortgage isn't being paid. They still have legal title to the property until the foreclosure sale occurs, so it's within their rights to do so. Of course they may not worry about an eviction 3 months before a sale but there is no guarantee, and I'm not sure if there are any personal ramifications to doing that (e.g., credit). The bank may say three months but it's very common that 3 months turns into 6 or 9 or longer depending on what the owner does and the state where you live. I never ended up hiring a lawyer, in my situation I just paid until the end of the lease and moved out as normal. That was in Florida though, where foreclosure can take ages. As noted, you should be in touch with the bank as the sale gets closer. Many will keep your tenancy in place if that's what you're looking for.

If you have any interest in owning the property, it could be a good time to put in a (low) offer. You'd be surprised what banks will accept these days in a distressed market where they can skip having to market the property and pay all the associated costs. Calculate the value of property your rent payment would support, that will be an informative data point on what it's actually worth.
posted by bpdavis at 6:11 PM on February 2, 2011

I'm in the UK, so things may be very different here, but I'm renting a flat in a house which was repossessed by the previous owner's bank, and I had no problems whatsoever. The balliffs came one day (after giving lots of notice) to change the locks, and the banks lawyers told us to start making payments to their letting agency instead of the previous owner's letting agency on a certain date. 3 months on, I'm still renting the same flat at the same rate, and everything seems fine.
posted by richb at 2:34 AM on February 3, 2011

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