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My cousin called me today w/a situation. She said she received a letter in mail from the mortgage company for the home she’s renting. She opened it not looking at the name it was addressed to and read that the owner hadn’t paid the mortgage for 3 months. The bank is requesting the full payment for the three months by mid September. And stated that if they don’t receive full payment they will exercise their right to begin the foreclosure process. She’s been paying rent this entire time and she’s now nervous. She lives in Georgia which is a non judicial state so it doesn’t take long for foreclosures. She called me to ask if there was any way I could help out. She heard me speak about doing subject to deals and wanted to know if I could do the same with the homeowner.
How would you suggest I approach this? She doesn’t want to pay rent to the owner anymore & would prefer to pay the bank directlly and then pay the owner the difference. I’m not sure she can do that legally. Any thoughts or suggestions would be appreciated!
Erica, I don’t pretend to know the intricacies of Georgia law, but in most states the tenant’s contract has to honored by a new owner. Suggestion: have your cousin ask that bank if they plan to honor her rental contract. If the answer is yes, then ask if they will put that intention in writing for her. If the answer to that is no, then she might want to contact a tenants rights organization in Georgia (which might save her the cost of an attorney) to confirm her rights as a tenant with a written lease. There used to be a federal law about tenants’ rights in case of foreclosure, but I think it expired some time back. I’m not a lawyer and don’t play one on TV, so regard my thoughts as suggestions that need verification.
Oh, she would be well advised to make a copy of that bank letter to keep, but also make sure the landlord gets the original — quickly.
–Dee
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I should have added two more thoughts:1. Have your cousin bring along her physical rendition of her rental lease contract when she visits that bank.
2. She might find it useful to ask the bank’s intention about maintaining the property. Some banks have a pitiful reputation about that. It’s also possible (if the current owner is unable to make up the back payments) that the bank intends to sell or auction off the property as quickly as possible, and if so, any new owner could become an “unknown” as a quality landlord and maintainer of the property. So there are some uncertainties in this property’s future.
–Dee
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HI Ben,
Thanks for your input. She said she contacted him a few months ago and asked him about selling b/c she thought she’d be able to get a loan. He responded that he would like to sell and that he would accept market price minus the realtor fees. Which is why she asked me to approach him this time about doing a sub 2.
Someone else recommended she not do anything. Just continue paying the rent as she’s supposed to and leave it at that. If the bank takes over they’ll have to honor her lease so she should be fine. And that she should simply look for a place to move to when her lease expires. However, she’s concerned that if someone purchases the property and they claim it’ll be their primary residence, then she’ll have 90 days to move out. That’s the law in GA. I’ve attached the tenant landord handbook for GA. The Foreclosure & Tenants section starts on pg 72.
Hi Erica,
If its been a few months since contacting the landlord, I would contact them again. I would also let the landlord know that she received the notice that payments aren’t being made to the lender. Time has a tendency to change motivation, especially in a case like this.
I’m not sure about Georgia, but when an owner/landlord receives rent payments but doesn’t make the mortgage payments, its called equity skimming (or something similar) which is potentially a felony or at least other legal problem for the owner.
I would do some digging here. Could certainly be a deal. I would not just wait this out, but that’s just my two cents.
Ben
Ben,
I asked her to do what you said. He’s denying the fact that the home is going into foreclosure. He said at the very most he’s paid a few days late, but other than that, she should rest assured that the home is not going into foreclosure… at the same time he said he’d be willing to entertain any offers on the property. He claims he has tens of thousands of dollars in equity and that he could sell at any time, but renting has simply been working out for him all these years. BTW, he’s an out of state owner.
So my thoughts are if he has equity, he may not be interested in a sub 2 deal. Or he may be depending upon his desperation…I’m not sure how to approach this one. She could give him an offer to purchase the home, but like I said before, she isn’t able to get a mortgage loan at this time.
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Erica, the fact that the bank’s letters are going to the property address instead of the landlord’s address suggests some longstanding problems. The landlord may be denying that he’s in foreclosure because he’s likely not receiving the bank’s notices. He may also be denying that because of simple dishonesty. I would think that even a bad bookkeeper would likely be aware of three overdue payments. There’s a good chance that he never notified the bank that he was using the property as a rental, and that he was not the resident. There’s also a good chance that he never set up proper insurance for rental use, and that any claim on the property would be denied on those grounds. Such failure to maintain correct insurance for the property’s actual use would probably put him in violation of the strict conditions in his mortgage.So IF that landlord is being dishonest with his lender, with his tenant, and with the insurance company, what are the chances of being able to do a reliable deal with this guy?
–Dee
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