"Accidental Landlord" - an accident waiting to happen?

It has become more commonplace for a private homeowner to unexpectedly find himself (gender neutral for this writer's purpose) playing the role of landlord as a result of the difficult selling environment in real estate. This happens because the property owner needs to move on to a new job, or some such compelling reason. When the home sits empty, unable to find a buyer, the "Plan B" is dusted off and presented to the owner: RENT IT! Get some revenue stream started with the property!

And so this home that perhaps was on the market for SALE, now becomes a home on the market for RENT. There are two sides to a lease arrangement: the landlord's side, and the tenant's side. Each has its own set of challenges, thrills, and every other emotion in between. Most Realtors will tell you that they are handling many more home rental listings over the past 3-5 years than they ever imagined they would. I include myself in that statement. I have represented both landlords and tenants.

I want to keep my posts brief, so this one will put forward one caveat for would-be tenants who are searching for an appropriate rental property. Do whatever you can to feel confident that your landlord is not having mortgage difficulties on the property that you intend to lease. Or at least be prepared to move with perhaps only 30 days notice once you do move into the property. Unwittingly, tenants can sign a year lease, move in, and unceremoniously be forced to vacate in the first month because the owner is in pre-foreclosure and the bank has earned the right to take the property back. This is exactly what happened to tenants in a downtown Evanston condo last year, folks who were referred to me to rescue them and find an immediate replacement rental in a matter of days. Yes, I helped them find a wonderful new rental home. The agent who rented the condo to them had some unpleasant consequences, I was told. My office sales manager has repeatedly warned us agents to be diligent when working with rental clients (or landlords); "Check the status of that property!" We Realtors are charged with taking every precaution to protect our clients' interests, and that includes not getting kicked out of a rental property before the term of the lease ends.

When looking for a rental home, you must do your homework on the owner of property, regarding the mortgage status. There are websites online that promise to report on a landlord's mortgage status, for a subscription fee. On the other hand, you can determine that information for yourself, free of charge, if you are looking in a community that has public website access to county records, such as the Recorder of Deeds and the local Circuit Court. Foreclosure is a legal process, and foreclosure lawsuits can be tracked online here in Cook County.  Or, you can put that task in the hands of your favorite Realtor, who will take care to show you only properties that are not tainted by the threat of foreclosure.

This is just one more outcome of the whole housing/mortgage crisis in America, but at least you can manage it by taking precautions to protect yourself.

A SMALL HOLIDAY GIFT FROM FANNIE AND FREDDIE

Just in time to perhaps give distressed homeowners a chance to enjoy the holiday season, Fannie Mae and Freddie Mac have announced that they will not evict any affected foreclosure-victim families from their home (single family and 2-4 unit properties) from December 19 through January 2, 2012. It's not much, but at least the holidays can be spent in familiar home surroundings.

Tenants, Do Your Homework!

I just inherited a client who is living a nightmare, through no fault of his own. His employer has relocated him to my community of coverage from out of state. The client leased a nice condo unit in a popular building. That was three weeks ago. This client is now being forced to move out. Want to guess why?

Yep, the condo owner is in foreclosure, and the unit is scheduled to be auctioned at sheriff's sale very soon.

Yes, I will be showing this client a rental condo or two, in addition to some rental apartments, but it was a moment of agent-client bonding when I sat at the computer with this client and checked the online recorder of deeds file for those condos we plan to visit.

Rental clients are a much larger percentage of our business in my broker's company of late, and the newest "wrinkle" in helping a tenant on the hunt for a new home is verifying the clear title of the condo for rent. And not just a search for foreclosure problems is needed; a condo owner can be putting his tenant at risk if the owner has not been paying the condo assessments as well. In this state (Illinois), the condo association has the ability to seize the condo unit for nonpayment of assessments, and arrange for its own tenant.

Just thought I should pass this along as a "heads up" to my colleagues out there across the country, as well as folks who are searching for a home to rent. Bad things CAN happen to good people (the tenant), but we can minimize the risk by taking a moment to verify a fact or two.

The Critters are Capitalizing on Stupid Human Tricks

According to a recent article in the Chicago Sun-Times newspaper, there is an interesting side effect of the growing number of foreclosed and vacant properties in the city (and suburbs as well, I suppose).

As a Realtor, I've been in my share of foreclosed properties the past 3 years, and it isn't much fun. Be careful to avoid walking directly under the falling ceiling plaster. Step around that hole in the floor. Oh, and don't let yourself trip over the bulging hardwood floor that rises a good 6 inches above the rest of the flooring. Hold your breath so the mold doesn't make you gasp for air. Never mind the paint that is peeling off the walls in sheets, just like wallpaper might do. Don't be alarmed if the basement concrete floor looks like the surface of the moon from the frost and freeze cycle of the ground underneath it. Obviously, don't expect to find a forgotten soda pop in the refrigerator, because there is most likely no refrigerator in the kitchen.

And keep your distance from the raccoons that have invaded the house. The abandoned houses are apparently an attraction for the wild creatures that share the city with us humans. Makes sense; it's shelter from the elements, protection from those pesky dogs that tend to chase them up a tree, and a virtual playground with all those stairs to climb, counters and cabinets to explore, windows to peer out of.

And they aren't satisfied to enter only the empty houses; the nice neighbors next door are getting visits from the 'coons as well now. Seems the fear of humans is decreasing in the animals, and they think nothing of squeezing through a partially open window to munch on the smorgasboard on the kitchen counter and the goodies stored in cabinets.

The City of Chicago is waking up to the problem and ramping up the distribution of traps to the owners of occupied houses who request this assistance in an effort to eliminate those late night run-ins with 4-legged fuzzy creatures in the kitchen, when all you wanted was another glass of warm milk and a cookie.
(Photo courtesy of Flickr Creative Commons - RubiconLaw)

Rent Checks vs. Mortgage Checks

Another sign of the real estate market condition in these parts is the high volume of rental listings that we brokers are handling. Rental listings have typically been but a drop in the bucket of the total business done by a conventional real estate brokerage in Chicagoland. Not so much right now!

In my own office branch, a full 50% of our monthly transactions are now residential leases. That is a huge number for an office that is more accustomed to selling and buying homes in the higher price ranges.

Why is this happening? It is definitely a result of the housing market slowdown. Many folks cannot get a mortgage right now (credit score too low, not enough downpayment, debt to income ratios out of wack, have a house to sell before they buy but can't get a bridge loan). Others are relocating here from other cities and cannot afford to housing in Chicago, even with our depressed pricing. Others have sold their home and haven't found what they like to buy as the next home. Still others have been forced out of their homes due to foreclosure (or the threat of foreclosure and sold as a "short sale"). Everybody still needs a place to live. So what are the choices? Move in with your best friend (not always an option!), or rent.

The mortgage specialist in my office told me that she pulled 16 credit reports for leasing situations in one week. Again, that is a huge number for our office.

I have personally assisted more clients with a rental property this year than in all my years as a Realtor combined. And yes, there are lots of rental properties in the multiple listing system. Going on a rental home search is usually easier with a Realtor at your side, instead of going it alone. Case in point is a lease that I just wrapped up for clients, a difficult situation because it is a condo unit with an association and property management company that put many demands on them. Because I am so familiar with condo operations, I was able to guide them through it, anticipate the problems, and put out the fires that did erupt. The cost to a client for my help with a rental search? $0.00 if it is a MLS listed property. The listing brokerage shares the commission to my company, paid by the owner of the property.

So if renting is in your future, dust off your checkbook, boost your credit score where possible, and give me a call!

A Foreclosure Close to Home

Foreclosure is a word we hear every day in the news, and we Realtors certainly have to speak the word far more often than we wish we had to these days.

I have shown clients many foreclosed properties this year, and I have seen firsthand the effects of foreclosure on the house itself, and its neighborhood. It isn't pretty.

And foreclosure hit very close to me this summer when a property in my townhome community fell into foreclosure and was finally auctioned off. To describe the process could be lengthy, and it might be boring to read. But I want to simply tell you, the reader, how quickly and how brutally a homeowner's world can come to an end, at the auction.

I attended the auction of the townhome in my community, along with my homeowner association president, on a September morning in Chicago's Loop. (Please click on the link below to read about the company that conducts these auctions, Judicial Sales Corporation.) We rode up the elevator in a lovely office building on Wacker Drive and exited at the correct floor, and were guided into a small meeting room. It was set up with some 40 folding chairs for visitors to the auction. At the front of the room sat the auctioneer, with an assistant or two who acted as runners, carrying file folders back and forth into the private offices of Judicial Sales Corporation. The HOA president and I knew our neighbor's property was to be auctioned at 10 am. We were seated by 10 am and waited for the proceedings to begin.

Every visitor was handed a list of the properties to be auctioned that week. Some 250 properties every single day were scheduled to be auctioned. They were handled in no particular order, so if the visitor was there to observe or to try to buy a specific property, you did not dare leave the room because each property is dealt with in less than 30 seconds. That's right, 30 SECONDS.

The auctioneer picks up a file folder, reads off the court case number, the property address, and the "opening bid." (The bid is actually the dollar amount that the court has awarded the mortgage lender who is left with a property and nobody to pay the mortgage for it. In most of the cases, the lender wins the auction, because nobody else wants to bid on it.) The auctioneer asks "Do I hear any other bids?" She waits about 5 seconds, and then says "going once, going twice, sold." She makes some notations on the file, closes it up, and hands it to her assistant, and it's over with. Done. Somebody just lost his or her home.

The particular frustration that my homeowner association president and I felt that morning was that our neighbor's house did not rise to the top of the file folder pile before the auctioneer looked at her watch, said "Well, it's 10:45 am now, time for a break. We'll start again at 2 pm this afternoon." WHAT???? 2 pm?? Neither of us could be back at 2 pm that day, so we did not actually get to witness the end of our ex neighbor's homeownership. But it was an enlightening experience, none the less. In our neighbor's case, the lender won the auction (body else bid on it), and now it has been listed for sale with a broker who deals rather exclusively in foreclosures.

The ins and outs of foreclosure are deep and complex. I plan to write about it from time to time, but in small chunks so as not to overwhelm OR to bore the reader. But just let me say that foreclosure is a very sad thing, for everyone around the home is touched by it in a negative way. If you are facing problems in paying your mortgage, or know someone who is, please contact that lender right away, or an attorney who specializes in foreclosure situations so that you can save as much of the situation as possible. Going into a foreclosure without a good legal adviser will cause you even more harm. Minimize the damage. Get help, please. I can provide names of attorneys who work in this field, and the cost of their services is minimal compared the loss incurred by the homeowner who tries to navigate the process alone.

http://www.tjsc.com/TJSCHome.htm