In November, we thought we'd reached the last straw in terms of the condo we have been renting. We'd had numerous problems with our place and our landlord (namely, not fixing things when they broke — major or minor). However we ultimately decided that, although the right choice wasn't obvious, there were too many aspects of our lives up in the air to move at that moment.
Then, on December 30, our landlord told us that they weren't going to be able to refinance our property. The condo we live in was going into foreclosure. The auction was scheduled for December 31.
This is my and Jake's foreclosure experience as tenants. As you will see, there are lots of variables when it comes to foreclosures, and “your mileage may vary.” Whether you are a tenant or an owner, pay attention to all the documents you are given and consult an attorney or tenant advocate if you have questions about your specific situation.
The first thing you will do is wait. And wait.
Our condo has been on the brink of foreclosure for years. According to MSN, while default technically begins when the first payment is missed, it is usually 90 days before a “notice of default” is given. Even then, the homeowner gets another 90 days, called the reinstatement period, to bring their loan up to date. If that doesn't happen, a trustee's sale is scheduled and the property is auctioned.
We received our first notice of trustee's sale in July 2012, which means at that point our landlord had likely missed 6 months' worth of payments. They were able to bring the home out of foreclosure at that time, though we don't know if they refinanced or what that process was like. Are there any GRS readers who have been through a foreclosure from the owner's side and know how to redeem a property once a trustee's sale has been scheduled? I'd love to see a reader story about this that is more up to date than this GRS foreclosure story from 2008.
We received our next notice of trustee's sale in November 2013, mentioned at the very beginning of this article. However, the trustee's sale was postponed three times before finally taking place in mid-February. During this time we followed the status of the sale of the property on our county recorder's website and on Auction.com.
During this time, we also found out that our landlords had listed the condo as their primary residence to avoid our city's rental tax. This meant that the bank was trying to reach the owner at our address. They even sent people to the house a couple of times, though they were all perfectly pleasant when they met us and we explained that we were just the tenants.
After the trustee's sale
About two weeks after the trustee's sale finally took place (check out this reader's story about buying a foreclosure on the courthouse steps), we came home to a notice taped to our front door. Our property was now owned by Freddie Mac.
The note on the door was relatively chipper in tone: If this home has been lost to foreclosure, you have options, it advised. According to the 2009 Protecting Tenants at Foreclosure Act (PTFA), those options are:
Rent the home under your current lease while Freddie Mac markets and sells the property. Since we were already month to month, this wasn't an option for us.
Rent the home under the Freddie Mac Rental Program. This option is available for both former homeowners as well as current tenants. Essentially, it is a month-to-month lease while the home is marketed and sold.
Accept cash to relocate to a new home. If you move out by a date set by Freddie Mac, you are eligible for cash for relocation expenses.
The note on the door said we would be contacted by an attorney within 30 days and at that time we'd have to let them know our decision. We kicked our home search into high gear at this point, aided by the fact that Jake had accepted a new job and we now knew the geographic location and budget that would work for us.
Four weeks later (March 27, I think), we got a certified letter with forms to indicate the option we were choosing. Far from the optimism of the first notice, this time Freddie Mac meant business. Eviction proceedings have begun! it announced. To avoid eviction, please select one of the options outlined to you and return the appropriate paperwork within 10 days.
The options above were explained again, but this time there were dates included for the third option. If we moved out by April 9 (not possible for us), we'd get $3,000 in relocation assistance. If we moved out by May 9, we'd get $2,000 in relocation assistance. By that time we were far enough along in our search to feel comfortable opting for the relocation money (also known as “cash for keys”).
Thoughts about foreclosure from the tenant's perspective
As a tenant, it was frustrating to have paid the rent on time and in full for almost five years, only to have the property enter foreclosure. The degree to which our landlords prevaricated, procrastinated, and (at times) outright lied to us did not do much for our faith in humanity! While obviously we don't control their financial decisions, more open communication would have been appreciated. We found out about the trustee's sale when the notice was taped to our door, for goodness' sake!
I won't fully relax until this all concludes in early May and we are safely ensconced in a new home. At this point, though, it does seem like everything is going to work out for the best, for us at least. We do suspect by some of the things our landlords said and did that they were using our rent to pay the mortgage on their own house, which may now be in jeopardy. There's nothing we can do about that, however.
Clever readers may have deduced that we are essentially getting five months' free rent and $2,000 in cash out of this deal. However, all this stress leaves me needing to take a deep breath, if not indulge in a cocktail! Even living with an attorney who understands the legalese and knowing that we were fully complying with the law, the uncertainty has weighed on me every moment of every day.
What's next? Hopefully, everything will be settled and I'll have an update and a new budget in early May!
Author: Honey Smith
Honey Smith has been reading GRS since at least 2008, right when she got her first â€œrealâ€ job and started getting serious about finances. She and her husband Jake are in their mid-30s and recently bought a home together. Currently, she manages graduate programs at a large state institution, and he is an attorney at a mid-sized firm.
Between them, they have paid off approximately $30,000 in consumer debt since she started writing for GRS in 2012. However, they still have nearly $200,000 of student loan debt, so she will continue to chronicle their debt-paydown journey. In addition to personal finance, Honey is interested in vegetarianism and cooking, gardening (despite living in the desert and having a black thumb), issues in higher education (including the student loan bubble and the slow death of tenure), and animal rights; however, her heart lies with fantasy novels, trashy TV and Skyrim.