Introducing Morph Experts: A weekly blog feature where a "Morph Expert" answers some tough questions about their field. Everything home related - real estate, leasing, construction, and design!
A Foreclosure Guide for Renters - Part 2: What happens when the bank is my new landlord?
by Morph Expert: Sarah Logterman
This one was hard to find an answer for. We asked our landlord, we talked to an experienced Realtor, and we looked at Minnesota’s tenant laws online. They all gave us a little bit of info, but no one source had all the answers. But here’s what we pieced together:
On the date that the six-month redemption period ends, the property owner no longer has any rights to the property. It is now owned fully by the bank, for them to do with it as they please. Usually, they want to sell it. So, since it’s easier to sell a house when it’s vacant, they just want the renters out of there. It’s nothing personal, it’s just business. BUT – they can’t immediately kick you out.
But let’s back up a minute – how do you know when the official redemption period end date is? You might think that it would be exactly 6 months after the sheriff’s sale, but ours was more like 8.5 – not sure why. Here’s how I found out mine: about 3 months after the sheriff’s sale, we came home to a sheet of paper taped to the door requesting that all tenants of the building call this phone number to give information on its occupancy. The phone number was for a real estate agent that had been assigned to this duplex by the bank. His job was to put it on the market once the bank owned it and to facilitate negotiations with the current tenants. A few months after giving him the info he requested, I called him again to ask him what would happen to the property once the bank owned it. He was more than happy to help me. Not only did I get the official redemption period end date, but I got a lot more information about what to expect once the bank took over.
And here’s what happened:
As soon as the bank owns the property, the real estate agent will post a notice on the door of all the units with tenants still living there. This notice will give the tenants a few different options:
#1: Sign up for a month to month lease with a property management company at the current market rate rent amount.
#2: Vacate in 90 days, which is the legal amount of time they are required to give you.
#3: Vacate sooner than 90 days in exchange for relocation assistance money.
We got our notice on a Monday, since the redemption period technically ended over the weekend. We had 10 days from the date on the notice to tell the agent what our choice was.
So what do all of these choices mean?
#1: If you choose to stay and rent the place, just note that you’ll have to pay current market rate rent, which might not be what you’re used to paying. Do some research on Craigslist and see what “market rate” might actually mean for your apartment. We didn’t explore this option, so we didn’t see any numbers or lease terms. Also, remember that the bank will want to put the house on the market soon, so be prepared to put up with showings if you’re going to stay there for a while.
#2: Vacating in 90 days means that you have exactly 90 days left to live there – without paying anyone rent. Period. Sounds like a pretty sweet deal, right? (This is the option that we chose.) All you have to do is be totally moved out on the 90th day after the date you got your notice, and leave the place in a “broom swept” condition.
#3: Relocation assistance money, or “cash for keys”, means that they give you bonus money if you vacate sooner than 90 days, again leaving the place in a “broom swept” condition. Here’s the deal that they offered us: Vacate in 4 weeks and get $877. Vacate in 2 weeks and get $1277. (I’m not sure where these dollar amounts came from, so don’t count on your offer being exactly the same as this.) So, if you already have a new place lined up, getting some cash out of the deal isn’t a bad option. But, we needed a little more time to move out, so we chose the 3 months free rent instead.
One thing that the agent did tell me was that with both of the vacate options, they would not be putting the duplex on the market, which was reassuring. It had been on the market for almost a year before the foreclosure, and putting up with showings every week was a nightmare. So we told him we would take the 90 days to vacate, and that was that!
By Morph Expert: Sarah Logterman, Office Manager & Property Management Specialist
Stay tuned for "A Foreclosure Guide for Renters - Part 3: Saying goodbye to the bank"
Do you have a question for a "Morph Expert"? Submit it here.
