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IR:
I have a question on the potential size of “rent skimming”. Is it true that the time it takes from first note of foreclosure to actually being evicted is normally a few months? If this is true then the rent skimming damage should be negelgible because the renters would have stopped making rent payments from the first sign of foreclosure. The renters could live in for a while to recoop the deposit and maybe moving allowance.
Is this what actually happens?
No, that is not what happens. Most of the time the renters do not know that the landlord has stopped making payments. When you say, “because the renters would have stopped making rent payments from the first sign of foreclosure”, what is the first sign?
Foreclosure notice on front door.
That’s how my neighbor found out.
Luckily, his landlord was pretty cool and to get him to stay he’s making him pay only half rent.
This is one of the worst features of the law; even if your landlord is skimming the rent, you still owe the money. A tenant is renting a property owned by a landlord. As long as the landlord still owns the property, the tenant is liable for the rent payments even if the landlord is skimming it. Failure to pay rent that is being skimmed by a landlord puts the renter in breach of contract. The skimming landlord could take them to court to get the money and report them to the credit bureau.
So, how can a renter do to screen the private landlord? What do you think the following:
1) Ask for a copy of latest tax bill,
2) Ask for a copy of landlord’s ID, such as photo driver license,
3) Do a google search on the landlord as well as BBB check,
4) Anything else?
A renter can find someone with access to the property records to look up the debt on the property and see if they are a likely foreclosure candidate.
*raises hand*
I can help with this, just ask.
Is it possible to ask the landlord for a letter from the bank stating that the payment have been current in the last 12mo? I think this would be reasonable proof that the house is in good standing…at least for the next 6-8 months.
I’m not sure how a credit check is going to help. You can look tax bills up online.
IR, how do property records look if the property is a foreclosure candidate…are you just looking for all of the refis and HELOCs? Loan configurations (ie Option ARM)? Would the records state any missed payments?
Even if the property has sane financing that doesn’t mean the owner is current with the bank. Missed mortgage payments are the biggest red flag to me as a potential renter.
In many counties, such as LA Coubty, on line tax bill does not have owner’s name included.
I look at total indebtedness and compare it to the payment I would be making as a renter. If I know the owner is running a large negative cashflow, I simply would not do it. How long is someone going to be willing to lose $3,000 a month to maintain a feeble hope of rising house values?
In Orange County you can go to the tax assesor website and put in the address of the home or condo you want to rent. The owners name will not come up but it will tell you if they are current on their property taxes. We have been renting a property for almost 8 months and saw that after we moved in Aug ‘08 the taxes due Nov. ‘08 were not paid and the next tax bill is due April ‘09> we are seeing this as a possble first sign they aren’t making their mortgage payments. A real estate agent can look up the property and tell you if the mortage is being paid, but their system only shows when the mortage is 3 months delinquint.
Depending on where you are located. Try propertyshark and/or courthousedirect.
Propertyshark will tell you who owns the house. Courthousedirect will tell you whether they have liens, notice of sale, or notice of foreclosure. Note that Courthousedirect doesn’t update daily, it’s somewhat less frequent. Still, people in distress usually have a trail of notices.
Thanks for the site recommendations. Looks like CourthouseDirect’s fees for one-off reports on O.C. properties (PropertyShark doesn’t cover O.C.) are pretty reasonable.
Courthouse direct can provide a lot of free information to the astute observer. If you have your landlord’s name and see Notice of Default, it could be their residence, the house a renter is living in, etc. You get to see that without ordering the documents.
If you see tax liens and lots of other liens, it’s probably well worth it to order any NOD or NOS.
Ah. Cool. I guess I missed where you could get info for free on the site.
In the 1990s, I lived in a house where the landlords got divorced. The wife ended up owning it, and she was a nutcase. Frequent visits to the psychiatrist, etc.
She didn’t pay her mortgage, but did collect the rent. We got a notice of sale. We called the bank. They said they couldn’t give us much in the way of details due to privacy. The foreclosure sale was delayed once. Then we asked when we would need to be out.
The landlord had gotten two months security deposit (I think the maximum has since been reduced by law). We also paid our rent on time. By not paying any rent the last two months, we came out exactly even. We also informed the bank of the day that we would be out, and asked if they wanted to inspect the house the day we moved. Instead, we had the real estate agent who leased the house come and look at it. We took lots of photos to keep the landlord from making up some reason to sue us.
She sued us anyhow. The judge in small claims court threw her case out.
My advice? File a Request For Duplicate Notice of Default with your county recorder. You will get a copy of any notice of default or notice of sale on the property. Sure beats having to find a new place quickly.
Glad to hear you were able to prevent your landlord from continuing to screw you.
To clarify on the Request For Duplicate Notice of Default, does that register you to be notified when and if such a Notice of Default occurs, or is it just a one-time check that will only let you know about a Notice of Default if it’s already happened when you file?
You will get a notice each time it occurs. So there might be 2 or 3 notices of default, and then a notice of sale.
Okay, but still not clear from your answer whether the first NOD needs to have already occurred when you file, or whether filing will get you all future NODs even if there hasn’t already been one. Thanks in advance for the info!
IR: If the property is foreclosed on, then the landlord becomes a former landlord, hence renter has no obligation to pay him/her, correct? Renter may have an obligation to pay the new owner (the bank) but I would think at this point all the bank is interested in is to evict the tenant ASAP in which case if the renter plays it well, can get some monetary benefit or free rent for a while?
In Florida the tenants get served along with the owner/landlord. Judicial foreclosure here. Don’t the tenants get a notice there? If not, how can their interests be eliminated?
All contracts are voided at the foreclosure. The tenant/landlord contract is void because the landlord no longer owns the property. This does not transfer to the new owner. The bank may offer its own lease to the existing tenants, or they may evict them. The bank has to go through the normal eviction process which takes at least 30 days.
My friend in SD had this happen to him. He immediately stopped paying rent and two months later the bank contacted him and offered him $1000 to move it in two weeks.
His deposit was 3/4 of a month’s rent so he essentially made good in this deal.
Sometimes this happens in Fla. Sometimes the renters get scared and leave. Sometimes they are long term renters and are happy to stay there paying the landlord. Sometimes the landlord tells them what is up, and they stay anyway.
In Florida, in order for it to be renting skimming, you have to do it on 2 properties! With intent of course.
And nobody asks for deficiency judgments, and nobody enforces this criminally anyway.
My good friend in Las Vegas just went through a different variation of rent skimming situation. In his case, the owners showed up one day and was surprised to find anyone living there since the condo had been in foreclosure proceedings for several months.
In this case, the owners lived out of state and had trusted their Realtor to rent the place. The Realtor was the one who was skimming. On the surface, to both the owners and my friend, the Realtor was well-established in the community and seemed reputable. It turns out, he was also a thief.
It is difficult to protect oneself from out and out fraud. We are living in a time where greed has done serious damage to trust. As economic times improve, transparency in our business models will become a strategic advantage.
Jeff, I feel for your friend. I was almost caught in that same situation about ten years ago. I myself was caught in a similar situation about twenty years ago, when the manager of my apartment complex was caught charging tenants for “pet rent” and other unorthodox fees, and she’d been pocketing every penny. I hope he’s going to be all right.
I’m currently watching a similar house here in Dallas, and the contortions between flipper and floplord are absolutely riveting. This 4800-sf house (five bedroom, three bath, and a garage space that’s a house all on its own) had been on the market for nearly three years, ever since the original owners died and their kids inherited. After sitting empty for a year, and the city came down hard on the owners for not maintaining the front yard, it went up for sale. I haven’t had the courage to check on the price, but considering the current market, I suspect both a ridiculous amount of HELOC abuse and even more entitlement are the biggest reasons why it hasn’t moved.
Anyway, the really funny part comes with the current status of the house. One week, it has big signs out front, reading “FORECLOSURE SALE: MUST SELL”, and then the next week the signs read “FOR SALE OR RENT”. For one week, the owners were trying to rent out the garage space on its own. It’s currently back to “FORECLOSURE FIRE SALE”, but I’m expecting something even more entertaining this Saturday. The worst part is that the owners figure that someone’s actually crazy enough to rent this place: would you be dumb enough to move into a place that had been advertised as a foreclosure, with the very good likelihood that you’ll be evicted and the owners get to keep your deposit and last month’s rent? (I know that most floplords will find any excuse to keep the deposit and stick tenants with as many fees as possible, but this is above and beyond the pale.)
what’s even worse is when the floplord sells you the house on a lease purchase meaning you paid some equity down to him and a part of every rent payment goes to equity. and do they have to post the foreclosure notice on the door? i’m wondering if renters would ever know till eviction..
Orange County’s newest Floplord per the Lansner blog~
In July 2005, while predicting a 15% gain in Orange County home prices, real estate prognosticator Gary Watts put about $77,000 down and bought a $765,000 rental home in Rancho Santa Margarita.
At first, he was pleased with the deal. A year later, the home’s value had jumped at least 8% to around $825,000 or more.
Today, however, Watts has defaulted on the home’s loan after the price dropped 22% from that original sale price. He’s currently in escrow, seeking his lender’s approval to sell it for nearly $93,000 less than he owes on it.
One more point ... I had a most interesting conversation with an assistant manager of a semi-prominent restaurant at Fashion Island in Newport Beach yesterday. What she told me was somewhat enlightening ... I say somewhat because I knew there were problems there, but I obviously underestimated the impact of declining wealth in Newport Beach. Especially at this restaurant, were at this time last year, you had to wait in the lobby for an available table. Needless to say, there are no more waits ... and plenty of tables.
To summarize, she said things couldn’t be worse, and that business started declining last year, but about 8 weeks ago (when the Dow dropped lower), business took a significant step down. She also told me that business has declined about 50% year over year, and the average check has declined about 25% from this time last year.
Good find Lee.
Watts is an idiot.
Was the restaurant you were referring to The Daily Grill? We went in there a few weeks ago and I wouldn’t say it was packed but it wasn’t dead either. Maybe because it’s a little more affordable than some other options?
Was the restaurant you were referring to The Daily Grill?
NO
Question for IR:
Assuming a bank is willing to accept the asking price for REO, are there other common factors that the bank isn’t required to disclose that complicate the matter? For instance, liens, back taxes, heloc(s), etc. I realize that short sales are loaded with roadblocks and rarely worth the effort. But does the REO usually close smoothly and quickly for an all cash deal (I’m assuming a realistic asking price for the sake of discussion).
This link is consistent with what I have seen in my somewhat limited experience.
http://www.foreclosuretruth.com/forum/buyers-and-investors/buying-auction/which-liens-are-not-wiped-out-trustee-sale
HOA liens, usually gone, unless a refi happened after they filed. Property taxes still due. Income tax liens more complex, there is a right of redemption from the IRS.
Remember that it’s possible that a second lien lender foreclosed with someone else is in the first lien position. The same property could technically be foreclosed two or more times against the same owner. That should show up in a title report.
Even if you happen to be getting one of those REOs in Riverside where you can pay cash, get title insurance. If you get a mortgage, the bank will almost certainly require it.
One of the things you should be most careful about with a REO is that typically it is a completely “as is” sale. In vacant homes, the oddest things can be missing, damaged, or not working. I ran into someone who purchased a house where the heating system had been carefully removed. They had thought the air conditioner was also a heat pump. Not so. The home inspector caught it, and they reduced their offer.
Once a property goes through foreclosure, all the junior liens are wiped out. Since it is almost always the first mortgage holder who forecloses, there are no other encumbrances on the property. However, banks rarely make their HOA payments while they own the property and instead wait to pay this off at closing. Also, if there are any upcoming HOA assessments, the bank is not liable. I don’t know what happens if an assessment goes out while the bank owns it. I imagine some HOAs will try this tactic if it gets them paid at a closing.
Since there are no surviving claims on the property, REOs are clean sales; although, you are buying the property “as is.” The bank is not going to allow holdbacks for repairs or whatever. They want to close their files, and they never want to see that property again after a closing.
Also, make sure you get title insurance policies (one for new buyer and one for new lender).
I was just in court yesterday, evicting my mother’s tenant for non-payment of rent. The laws are protective of renters so it makes it hard to get a tenant out before he uses the deposit up.
My mother is an original owner from 1971 with no debt. She likes to keep the rent low so she doesn’t have a lot of turnover. There are others like her out there. They will be in the older neighborhoods. Like every other situation. The crooks sound just like the honest people.
If I was looking to rent today, I would go to the an apartment complex. Even if you found someone like my mother, they could get sick or worse. Now you are stuck with the kids and their problems.
Interesting note re: this proprety, it’s been in and out of escrow three times already with the current prospective buyer being the 4th contestant. I imagine something rather ugly keeps coming up on inspection or the lender(s) are just not inclined to accept the short…
Also, there’s some weirdness going on with the pricing. It’s now saying “Backup Offers Accepted”-but the price went up to $539,000. Who raises prices in this market, unless they were told that was the absolute lowest the bank would accept (the house is definitely price below comps, as are most short sales). That’s probably it-they keep getting offers, but below the bank’s minimum, so the bank finally told them what the magic number was.
OT, but just something interesting ...
http://matadorlife.com/what-can-150k-buy-in-real-estate-around-the-world/
Sounds like a fun read. Unfortunately it appears their site has been Digg’d to death.
This Gary Watts story has me in a terrible mood today, especially coming here to read his “rent skimming” is perfectly legal. That he is effectively making money on the home right now just boils my blood. I really, really hope the bank and tenants are aware of the full situation (including Watts comments on ability to pay).
NPR did a story today on “sticky prices” in desirable areas. The journalistic rigor is pretty weak. The article discusses how more expensive areas have “stronger” owners; but the real question is what’s the probability desirable areas with stronger balance sheet owners will avoid the same percentage losses as less desirable areas?
“House prices are falling in most places, but for some buyers in Boston and other cities, they’re not falling far enough. Meantime, many who want to sell their houses are pulling back, waiting for a better market. This has buyers asking, ‘Where’s my bargain?’”
http://www.npr.org/templates/story/story.php?storyId=102371104
“The skimming landlord could take them to court to get the money and report them to the credit bureau.”
Credit bureaus will not listen to individuals. You must be a large organization to ‘ream’ someone’s credit. Yes they can take you to court, but that’s about it.
Don’t think that apartment complexes are safe either.
Just google “Bethany Group” to see the nightmare for the tenants of corporate owned housing going BK. I suspect that there will be many more examples of this over the next five years.
Hello, I need to put my boss up in a hotel in Irvine (yes, he’s a good guy). Can anyone recommend a nice hotel in Irvine near restaurants and things to do? Thank you!
Irvine Marriott off Von Karmann isn’t bad and close to restaurants and the airport. Irvine Hyatt off Main/Jamboree isn’t bad either.
Hyatt is very nice. Note the parking charge!
“Which circle of hell do they end up in?”
All forms of fraud are in the Eighth Circle of Hell, according to Dante. That’s the one that’s divided into ten sub-circles or bolgias. Since this is a form of theft, it is the seventh bolgia; unless you want to argue it is a material fraud, in which case it is the tenth bolgia.
Thank you, interesting that someone knows the answer.
This house is almost straight from the 70s with a minor (re: Home Depot) kitchen remodel.
Love that “Lounge” ceiling in the kitchen. During my young lounge lizzard days I stared at ceilings like that quite a few time while I wallowed in margaritas and kamikazes.
The outside is also out of the 70s.
I feel like watching Anchorman again. ;-D
I wanna know what’s up with all the filth / seepage on the edges of that ceiling recess. Yuck.
I had lunch today at noon at the Chaparosa Grill in The District while I was waiting for my new tires at Costco. I was the ONLY person in the restaurant until I was leaving when a couple was coming in. It was truly bizarre.
Every time we go to JT Schmid’s it seems pretty busy. That’s on a weekend however. Maybe it’s pretty dead during the week since nobody has jobs anymore.
That is too bad. My wife knows the Chef/Owner’s wife. We have eaten there a few times, and we like the food. I hope they make it.
IrvineRenter,
How’s this for legally stealing? Banks are buying the same toxic assets they are trying to get rid of. Read this article:
DOUBLE-DIPPERS
CITI, BOFA BUYING BACK LAUNDERED LOANS AT LOWER RATES
http://www.nypost.com/seven/03252009/business/double_dippers_161157.htm
Then put it together with the Geithner plan where “Private Investors” can buy toxic assets passing all the risk to the tax payer while they buy the toxic assets from themselves at near par. Watch this video:
http://www.youtube.com/watch?v=n-arbfLTCtI&feature=player_embedded
SO depressing! Watch the Vid!
This is a fantastic video. I may put it in a post. It is exactly what it going to happen. The powers that be have figured out a way to steal taxpayer money without people understanding it.
I’m afraid it might happen. Otherwise I cannot explain the recent strength in financial stocks.
It looks like we are not the only ones frustrated by Irvine prices:
Bargain homes in Irvine? Judge for yourself
IR—Just noticed that the property you profiled today is one I included in my round-up. It was the least expensive 4-bedroom SFR I stumbled across, and now I know why. Nice work!
By the way, loooong-time lurker, first-time poster.
Frankly speaking, I was not aware of all the laws at all. This blog has really helped me in the past few months. Thanks!!
Can someone explain why the average listing price for single family homes in Socal MLS went up for Jan? Second chart from the top, left side.
http://www.socalmls.com/Content/Content.aspx?CategoryID=527325
Interesting. Maybe a lot of it is people desperate due to the economy to get more for their houses than is realistic? Since actual sale prices continued to go down in January (http://www.socalmls.com/Content/Content.aspx?CategoryID=527326), I guess it’s nothing to worry about.