Plans to buy foreclosure home can be difficult if tenant is involved

 
 
Posted10/24/2014 12:01 AM

Foreclosed homes typically are sold at a deep discount, but the sale can be complicated if the property is occupied by a renter.

Q. We found a really nice house at a great price that we'd like to buy. The problem is that the house is midway through the foreclosure process and now occupied by tenants, who signed a one-year lease with the current owner in August after the owner ran into financial problems and couldn't pay his mortgage. If we purchase the home, can we tear up the lease and evict the tenants immediately?

                                                                                                                                                                                                                       
 

A. You cannot evict them immediately, but you might be able to get them out before their one-year lease expires next summer. The answer depends on a variety of factors, including what you plan to do with the property and the status of the tenants who occupy it now.

Tenants in a house or apartment that was in the throes of foreclosure had few legal rights until Congress enacted the federal Protecting Tenants at Foreclosure Act in 2009. That law provides two different sets of protection to such renters, based upon their individual circumstances.

If the tenants have signed a long-term lease, the federal law states that the "successor in interest" -- that would be you, if you choose to buy the house -- must honor the agreement until its expiration date. No immediate eviction or rent increase is allowed, unless the tenants break their part of the bargain.

There are a handful of exceptions to this rule. One is that if you plan to occupy the home as your personal residence, you usually can evict the tenants with 90 days' notice, even if the lease won't expire for several more months. Another is that PTFA protections generally don't extend to current tenants if they're related to the owner who is in foreclosure or pay substantially less than the market rate for similar homes in the same area, and sometimes even those whose monthly rents are subsidized by various government housing programs.

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Though the PTFA is a national law, it's important to note that a few states have passed additional legislation that give tenants even greater rights when they're caught in the middle of the foreclosure process between a bank, the property's defaulted owner and a potential buyer. Those states include California, Connecticut and Maryland.

Call your local rent-control board or similar regulatory agency for more information. Even better, spend a few hundred dollars to consult with a local real estate attorney before signing a purchase agreement for a foreclosure that could cost you thousands of dollars and hundreds of hours in time if the tenants who live there want to fight it.

Q. What are the best household items to buy in October?

A. Many of the best buys this month are the same as in September. They include bulky outdoor items, such as patio sets and barbecue grills, as retailers slash prices up to 50 percent or even more to clear floor space for cold-weather products, like heaters and leaf blowers. Discounts on lawn mowers easily can top 30 percent, buying experts at Deals2Buy.com say.

Most homeowners buy new vacuums in the second quarter of the year to begin their spring-cleaning chores. But if you purchase one in October or November, researchers at FatWallet.com say, you'll be rewarded with a discount of up to 40 percent.

                                                                                                                                                                                                                       
 

If you need some new cookware, hold off on your purchase for a few more weeks: The lowest prices will arrive next month, just in time for the peak holiday-cooking season. Expect price cuts of 30 percent to even 80 percent off many kitchen-related items.

Also delay your purchase of a new TV, so you can take advantage of the cut-rate deals offered on or around "Black Friday," the day after Thanksgiving.

Q. My husband is 63 years old, and I am 57. We checked out some of the reverse-mortgage plans that you recently wrote about, and we were surprised to learn that the amount we could receive would be based on my age instead of his, which would result in a lower loan amount. Is this common?

A. Yes. Nearly all reverse-mortgage lenders base the amount that can be borrowed on the age of the youngest co-owner of the home. That's because assuming that the younger owner dies last, it will take longer for the bank to be repaid in a lump sum for the amount it advanced and the accrued interest.

It's really not a big deal. For example, if your home is worth $200,000 and your original mortgage has been fully paid, the six-year difference between your own age and your older husband's would result in only about $60 less if you and your spouse selected the popular reverse-mortgage plan that provides the owners with a monthly stipend that doesn't have to be repaid until both co-owners move out or die.

Real estate trivia: The National Association of Realtors reports that foreclosed homes currently sell for about 14 percent less than comparable properties sold by "non-distressed" owners.

• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 4405, Culver City, CA 90231-4405.

© 2014, Cowles Syndicate Inc.

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