Buried in a housing law signed this week by President Barack Obama are protections that will help thousands of renters stay in their homes — at least for awhile — after their landlord has been foreclosed on.
The law allows tenants to remain in their foreclosed rentals through the end of their lease and then 90 days after that before being forced to vacate by the lender. Renters without leases will have 90 days, a significant improvement over what most received before: almost no notice at all.
This should make going after REOs even more fun.
I can hardly wait!
I think its a good idea. Why is it a bad idea?
People shouldnt just get evicted right away just because they had some landlord who didnt know how to manage his finances.
They should have time to relocate.
Wheres the humantiy?
Why don’t we look at it as another business opportunity?
Someone will have to manage these rentals for the lender, if you have a property management company today, start marketing your rear end off to all lenders
As the article said, they have no resources for this type of activity, I am sure you could get away with a higher percentage management fee as the situation is only temporary (lease +90)
Once you get your foot in showing what you can do for the bank, you most likely also can sneak in some good contacts for buying these lender owned properties
With all the changes going on and all new laws from the new administration we have to use our creativity to capture all the new business opportunities
They leave alot of unanswered questions in the article…If i buy a forclosure on the courthouse steps and find out there are renters i cant evict them? What if they stop paying rent but they had a year lease would they be protected because the house was previously forclosed on or could they be evicted for non payment of rent? Dont get me wrong I dont think renters should be thrown out with no warning but it seems like it will make many REOS unattractive for people who want to buy for their own residence and for people who would rather chose their own tenants rather than inheret someone elses or banks would possibly make reos with renters very attractive just to get them off the books cause less people would want to deal with current tenants. I also wonder if the current tenant cannot produce a lease where does it go from there? I would assume they just get the 90 days. If the issue was just unaware renters being thrown out they could have changed notification processes for foreclosures filed to have the current renters also notified.
Why is it a bad idea? Because it’s grossly unfair to banks, investors and anyone else who might buy a foreclosure. That could be YOU if you’re an investor. If Obama gave them “30 days” from the date of offical notice to the tenant, that’d be different — I would be OK with that.
However if the tenant is 3 months into a 12 month lease, they would have that + 90 days to move out…in other words a whole year. There are such things as 2 and 3 year leases on single family homes too!
Imagine what would happen if you bought a bargain foreclosure at auction, and you were planning to rehab & sell the place within 60 days — but you have some renter in there who could stay there for a year or more! So flipping, rehabbing & selling, smashing & redeveloping, or even fixing up & then renting again … all of those options are flushed down the toilet just because the tenant is allowed to stay there. The problem is even worse if you buy a foreclosed apartment complex with a lot of tenants, with different lease term lengths. And knowing Obama, there is something in there that allows them to live rent free. Ugh.
Obama is good at making “quick fixes” that he thinks are good, which in reality have consequences that hurt more than it helps. His little law could actually hurt the real estate foreclosure market, or at least add a new set of encumbrances [renters] for investors & banks to face. Another example would be his idea of closing Guantamo - even his Democrat buddies in Congress think he is dumb for doing that … as he wants to move those Al Queda terrorists back to US shores. Obama should be thrown in jail himself.
Motivatedceo, Good point of view, I agree with ya. herbster
Debates are fantastic.
I agree with herbster. Motivatedceo has some good points as does Jcpil.
Obamas plan has some flaws.
If the landlord filed NOD then the tenants should get notice that they would need to relocate and the lease null due the NOD being filed. It takes 3 months or so for foreclosure to begin - no?
I have already seen REOs with tenants in place here in the southern california.
Anyone seen this already?
There could possibly be some advantage to this…hopefully to real estate investors.
One advantage might be that with the lenders having to wait a long time to sell might be much more motivated to sell the home for a lower price since they’ve been holding it so long…even though they are getting rent from it.
I general I don’t think it is too great an idea unless it allows people to purchase properties very cheaply…but who knows if that will be the case or not.
In Los Angeles, there are strong rent control laws. I believe any building built before 1980 something people can live in there as long as they want basically and pay a minimal 3% or so increase.
When a bank forecloses on a duplex or 4plex they are often selling it with tenants that are paying like $800/a unit. This is for something they are trying to sell for usually over $150,000 per unit so there is no way the building will cash flow. Doesn’t seem to make much sense to buy something like this especially in a downward market.
I did not read the article but in Jan or so they passed into law where an Fannie Mae loans that are foreclosued will allow the tenants to remain as long as they pay rent till lease end, Sometimes you can get lucky and find positive cashflow. However, this will allow you to taylor your offer to make the house cashflow at the current below market rents it is recieving.
Alot of investor foreclosures are not due to poor management, but the fact that got suckered into teaser loans, cash back on homes and sneaky brokers and realtors showering them with a pot of gold at the end of an invisible rainbow.
this in turn, gave you negative cashflow but cash back on the close to cover the loses and pray you would sell for profits but the market declined and it did not happen
Sounds like there will be no ‘owner occupied financing’.