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  1. #1
    Jeeplady66 is offline Member
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    Rental property and Sheriff's sale

    What is the name of your state (only U.S. law)? MN

    I have a single family home rental property that is up for Sheriff's sale in Aug. I have tried working with the lender on a mod, but because it is a commercial property I do not qualify for any assistance programs. The house has a cracked foundation and will not qualify for VA or FHA financing, so I am unable to find a buyer. The property has been rented by a wonderful, reliable renter for 2 years, but the rent is not enough to cover the mortgage payment. It is at 'market rate' for our area--I was able to cover the shortfall up until last year when I took a 50% pay cut. My renter is not interested in purchasing the property, he will retire in about 2 years and move south. I feel very badly that I cannot keep up with the mortgage payments, it is not his fault I am upside down on the house. The lender knows that there was a one year lease signed but it reverted to month-to-month after that. My question is, can I sign a 2 year lease with the current renter for Aug 1st and will the new buyer or bank have to honor it? Can they raise the rent after the sale?
  2. #2
    Banned_Princess is offline Senior Member
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    Quote Originally Posted by Jeeplady66 View Post
    What is the name of your state (only U.S. law)? MN

    I have a single family home rental property that is up for Sheriff's sale in Aug. I have tried working with the lender on a mod, but because it is a commercial property I do not qualify for any assistance programs. The house has a cracked foundation and will not qualify for VA or FHA financing, so I am unable to find a buyer. The property has been rented by a wonderful, reliable renter for 2 years, but the rent is not enough to cover the mortgage payment. It is at 'market rate' for our area--I was able to cover the shortfall up until last year when I took a 50% pay cut. My renter is not interested in purchasing the property, he will retire in about 2 years and move south. I feel very badly that I cannot keep up with the mortgage payments, it is not his fault I am upside down on the house. The lender knows that there was a one year lease signed but it reverted to month-to-month after that. My question is, can I sign a 2 year lease with the current renter for Aug 1st and will the new buyer or bank have to honor it? Can they raise the rent after the sale?
    I would go into the 2 year contract with the renter, and the buyer has to A) honor it or B) buy them out of their contract.
  3. #3
    nextwife is offline Senior Member
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    Quote Originally Posted by Banned_Princess View Post
    I would go into the 2 year contract with the renter, and the buyer has to A) honor it or B) buy them out of their contract.
    Why? Why are you advocating that the party being foreclosed deliberatly tie up the property and and stick the lender with the job of being a long term landlord, when the intent of foreclosure is to take non-performing asset, discount it if need be, and get cash for it so they can move that asset into performing status? REO departments are not staffed to be landlords.

    How would you like it if it were you that were foreclosing to recover some of your investment and the owner imposed a seventh hour long term rental on you?
  4. #4
    Banned_Princess is offline Senior Member
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    Quote Originally Posted by nextwife View Post
    Why? Why are you advocating that the party being foreclosed deliberatly tie up the property and and stick the lender with the job of being a long term landlord, when the intent of foreclosure is to take non-performing asset, discount it if need be, and get cash for it so they can move that asset into performing status? REO departments are not staffed to be landlords.

    How would you like it if it were you that were foreclosing to recover some of your investment and the owner imposed a seventh hour long term rental on you?


    the lender sticks it to everyone, giving out loans to people who the bank knew wouldn't be able to afford, then come in, "foreclose on the house" and leave people homeless, as well as passing the loss buck to us taxpayers while keeping any and all profit. no sympathy there. sorry.

    If it were me, and I was the poster, I would do exactly what I said to do. Corporations arent people.
  5. #5
    justalayman is offline Senior Member
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    if a person buys the property and intends on inhabiting the house, they can terminate the lease. MN has a 6 month redemption period during which nothing really changes (the current LL still collects rent from the tenant) After that, the new owner takes possession of the property. If they intend on living in the home, they must give at least 90 days notice to terminate the lease.


    If the new owner is not intending on inhabiting the unit, the lease continues on with the new owner.

    the terms of the lease cannot be changed unless there is something in the lease that would allow it.

    If the tenant is currently under a lease that does not expire until after the sale or if you enter into a new lease with obviously reduced rates or terms that favor the tenant a bit too much (in other words, something very different than you have currently), it will likely be seen as an invalid lease and be terminated regardless of whether the new owner intends on inhabiting the unit or not.

    here is what the law says to the lease:

    (b) Bona Fide Lease or Tenancy- For purposes of this section, a lease or tenancy shall be considered bona fide
    only if--
    (1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;
    (2) the lease or tenancy was the result of an arms-length transaction; and
    (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for
    the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy
    Last edited by justalayman; 07-24-2011 at 06:03 PM.
  6. #6
    nextwife is offline Senior Member
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    Quote Originally Posted by Banned_Princess View Post
    the lender sticks it to everyone, giving out loans to people who the bank knew wouldn't be able to afford, then come in, "foreclose on the house" and leave people homeless, as well as passing the loss buck to us taxpayers while keeping any and all profit. no sympathy there. sorry.

    If it were me, and I was the poster, I would do exactly what I said to do. Corporations arent people.
    That is a very broad statement.


    Most of the bad loans were done by secondary market lenders NOT local brick and mortar banks. "The lender" is sometimes a Wells Fargo, or a Bank of America or a Countrywide, and sometimes a small community bank, who is stuck with a crappy market even though they wrote reasonable loans. Because of these long distance loans written by mortgage brokers who had no stake in the long term performance of the loan the value of their own portfolio collateral went to heck. What you don't seem to realize is that the ability of community banks to keep lending and keep business functioning in their communities is tied to their ability to keep providing credit to local businesses and get non performing assets of their books. PEOPLE who have businesses can't keep their businesses running when the credit dries up.

    Not all who wrote mortgages are the same, and all should not be painted with the same brush.
    Last edited by nextwife; 07-24-2011 at 06:24 PM.
  7. #7
    Jeeplady66 is offline Member
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    i have owned the house for over 7 years, I qualified for the loan fair and square....income/credit score/ DTI were all good. I lived there for approx 2 years then moved in with BF and we have rented it out. I had most of the money saved for repairs (between 10-12K) but then lost my job, had to dip into savings, investments, etc to make this work. I am at rock bottom and WF will not work with me at all, despite 2 seperate attempts. It is a very small house....800 square feet, but with 2 garages, 3 city lots in a nice neighborhood. I tried and tried to work with them, and made partial payments but now it is over.....part of me wants to 'stick it to them' and sign a 2 year lease just because my current renter is A+ and doesnt deserve this chaos! WF will be stuck with a property valued at 90K---maybe they will get 50K at the sale**************I just don't want them to terminate the lease for my renter--I am charging fair market rent so I don't think that would be an issue. I know it is a bit 'shady' to write a 2 year lease but at this point I am out of options.....Would a buyer know there is an existing lease at point of sale?
  8. #8
    justalayman is offline Senior Member
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    I just don't want them to terminate the lease for my renter-
    if the buyer intends to use it for their residence, there is nothing you can do about it. If you throw in some goofy lease before the Sheriff's sale, I suspect it will be challenged.
  9. #9
    Jeeplady66 is offline Member
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    I wasn't thinking of throwing in a 'goofy' lease, just keeping to the terms we have had for 2 years, same rent, etc just writing the lease to cover the 2 years my tenant wants. Do you think they can challenge that? How would a bidder know there is an existing lease when they sell it?
  10. #10
    Jeeplady66 is offline Member
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    Update....

    The house was bought by the lender at the Sheriff's sale, for more than it is worth, imo. The 6 month redemption period is up in April, we did not re-do a lease before the sale. My renter is not happy, he intends on staying past the redemption date, anticipating a 90 day notice to leave.

    questions: Can we create a new lease in the redemption period? If so, who would be responsible for repairs, etc? The furnace is very old and weak, needs replacing but I am not willing to replace it. What does a lender typically do in this situation? Will the lender/owner assume the landlord duties or assign them to a management company?
  11. #11
    nextwife is offline Senior Member
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    Quote Originally Posted by Banned_Princess View Post
    the lender sticks it to everyone, giving out loans to people who the bank knew wouldn't be able to afford, then come in, "foreclose on the house" and leave people homeless, as well as passing the loss buck to us taxpayers while keeping any and all profit. no sympathy there. sorry.

    If it were me, and I was the poster, I would do exactly what I said to do. Corporations arent people.
    That's utter bunk. There were CERTAIN lenders (mostly mortgage brokers, NOT local and regional banks) that created problems for EVERYONE - originating loans in markets where they were clueless about local markets and values and gave a loan to anyone who could steam a mirror.. The banks were mandated to increase lending to marginal buyers and work harder to put everyone into home ownership.

    What is a bank SUPPOSED to do when a borrower cuts off communication, or retires and moves away, having their deadbeat adult kid move in and not pay? Should they just let the collateral deteriorate around them drawing neighborhood values down, rather than putting a responsible homeowner in there who WILL be more likely to keep up the place and make the property tax and sewer and water payments? How will future buyers get financing if the banks just leave all these non performing loans on the books and do nothing?
  12. #12
    nextwife is offline Senior Member
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    Quote Originally Posted by Jeeplady66 View Post
    The house was bought by the lender at the Sheriff's sale, for more than it is worth, imo. The 6 month redemption period is up in April, we did not re-do a lease before the sale. My renter is not happy, he intends on staying past the redemption date, anticipating a 90 day notice to leave.

    questions: Can we create a new lease in the redemption period? If so, who would be responsible for repairs, etc? The furnace is very old and weak, needs replacing but I am not willing to replace it. What does a lender typically do in this situation? Will the lender/owner assume the landlord duties or assign them to a management company?
    You have no legal right to further encumber the property by a new rental agreement.

    Understand that many smaller banks have very small REO departments and literally have extra personel to "manage" the occassional tenant occupied property other than waiting out the eviction period. It's late March- It's unlikely the furnace will be an issue for this tenant.

    THe lender takes physical possession upon vacancy, maybe rehabs it, maybe not, then get's it on the market to get it out of inventory.
  13. #13
    Jeeplady66 is offline Member
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    Nexie, I lurk here enough to respect your opinion, but I need clarification.

    Do I have no LEGAL right to further encumber the property and can you cite your source? Or is it a moral issue?

    I am really trying to help my renter stay for another year, until he retires. He doesn't deserve the chaos that I caused by short paying the payments and the result was the lender wouldn't work with me to get caught up. If he stays, the furnace would be an issue as winter in MN is cold!!

    IMO, the lender will lose money rehabbing it, as it needs 12-15k of foundation work, along with some other repairs like the furnace, new roof, etc. It is a small house, cute but with all the other REO's on the market it will be a tough sale. Our part of the country is typically about 2 years behind the rest of the nation.....we are just now starting to see the fallout from the housing crunch.
  14. #14
    Zigner is offline Senior Member
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    Quote Originally Posted by Jeeplady66 View Post
    Do I have no LEGAL right to further encumber the property and can you cite your source?
    You don't own the house. You don't have the moral or legal right to further encumber it.
  15. #15
    Jeeplady66 is offline Member
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    I DO own the house until the redemption period is up. Everything continues as usual....renter pays me until the house transfers to new owner.

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