Renting Out Property Subject To Foreclosure

Added March 18, 2008 by Ilyce R. Glink

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Summary: Is it legal for a rental property owner to rent a property that may be subject to foreclosure? A tenant should be given notice that the rental property is the potential subject of a foreclosure lawsuit. The landlord should also be using the income from the rental property to pay his mortgage lender and keep the property from becoming subject to a foreclosure lawsuit.

Q: Do I have the right to rent out a property which is subject to foreclosure without telling the new tenant about the foreclosure but stipulating a notice period of 1 month to vacate the property?

Does a Realtor marketing the property need to be made aware of the foreclosure lawsuit?

A: You may have the right to rent out your property that is subject to the foreclosure, but if I was the tenant moving in to your home, I sure would want to know that I might have to move out in a short period of time.

Nothing is worse than having a landlord tell you one thing, pay for movers and other expenses to move into a new home, only to find out that you have to move out in a month or two.

Although you didn't say so in your letter, I'm guessing that you're losing the property to foreclosure and have likely stopped paying your lender each month. Now you want to rent the property to someone who has no interest in becoming involved in the foreclosure. He or she only wants a place to live.

Are you planning to use the rental money to pay the lender? If not, it seems highly unethical to rent the home, pocket the money from the tenant and then have the tenant forced out when the lender takes over the property in short order. Would you want to be treated like that?

Your Realtor should know about the foreclosure. It's quite likely that he will work hard trying to find a tenant for the property, may even find one, and then the deal will fall apart when the sheriff arrives at the home to clear it out and give it to the lender.

If you're upfront with the Realtor and the tenant, and the tenant decides to use the home for a short term rental, fine. But it's up to the tenant to make that choice.

Your job is to be honest when marketing the home.

March 18, 2008.

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