Renting Responsibly: How Not to be a Victim of Foreclosure

The business section of the Denver Post included a bit about Fannie Mae signing interim rental contracts with tenants of properties their landlords couldn’t pay for. What does this tell me? A renter doesn’t know the financial position of their landlords. It used to be that was a just fine arrangement, but maybe it is time to reconsider how renter contracts are signed.

I’ve lived with two specifically rocky landlords in my life. One was plagued by having to replace the century old sewer system, and having to raise the rent. Shortly after the job was completed, the place was sold and we had to sign a new contract with the new owner. Since the excavation was occurring in our front yard, it was easy to see the potential financial blow such a project could land on our lessor, so we were relatively prepared for the hike in rent and only mildly surprised at the subsequent sale.

Two years later, we rented from an elderly couple, and the next thing we knew we were paying a property management service instead. The chatty lady behind the management desk informed me one of the previous landlords had died, and that the property was being sold to their son in a different state. The elderly couple had been more than happy to reimburse us for some improvements on the property, but their son was not. We struggled with the tagged-on management fee to the rent in addition to the cost of the repairs we had already done. We managed to move before the property was sold a second time.

Today, these scenarios are playing out across the country: sales on the horizon and financial trouble for those who own the property. Hardworking, prompt-paying renters are being dealt the shoddy hand as there are no buyers and the banks take over. Good renters with steady incomes are finding themselves struggling through no fault of their own.

While the government bailed-out institution Fannie Mae can help some people in the coming months, and Freddie Mac not far behind, what can the rest of the renting population do to ensure they aren’t standing on the soft earth above the invisible hole their landlords are digging?

• Check the public records of your rental property. The county assessor’s office has records on sales price, owners, tax and purchase information. Is your rent commiserate with a mortgage beginning that sale date for that sale price? Is your rental income enough to cover property taxes, too? If not, you may not be covering the expenses of the owner.
• If you have a property manager, read your lease or call to determine if the company is legally responsible to you if your lessor goes under. If they are, you may be able to rent under them if you are removed from your home due to foreclosure.
• Talk to your landlord. Find out if the place you’re renting is paid off or if they’re able to manage the mortgage responsibility. Ask them to call you if there are money problems ahead that may endanger their contract with you.

If you are served with an eviction notice due to foreclosure, there are tips in the article including

Find out how long you are legally allowed to stay after notice.

• Find out if the lender is willing to sign a contract, as Fannie Mae is

You have a right to know if the house you’re renting is actually available for you to rent. Just because the place is vacant and someone is willing to sign a contract with you and take your money does not mean that you have a place to live. Being a good tenant is not just about being good to your landlord by paying rent on time, it also means you are good to yourself and your family by making sure there is a solid roof over your head.

James Hendrickson

James Hendrickson is an internet entrepreneur, digital publishing junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.