"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.

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.

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!

Real estate is not simply buying or selling properties

I had a fun afternoon today, helping a client search for just the "right" condo or apartment to rent for awhile. The search is focused in Chicago's Loop area, which means investigating numerous hi-rise buildings with varying amenities.

Yes, licensed real estate agents can help a client with a rental property, either to list the property in the multiple listing service, or to work on behalf of a would-be tenant. As a listing agent, the compensation for handling the rental process is typically the equivalent of one month's rent. As the tenant's agent, compensation is paid out by the listing broker. The client pays nothing for a Realtor's assistance in finding the right rental home.

We are in Chicagoland, which means there is a huge offering of rentals on the internet, particularly CraigsList.com. Often we find that Craigs List provides larger numbers of rentals than does the MLS. I always advise a client to search Craigs List, in addition to having me arrange suitable rental property appointments.

Choosing the best rental property for a client might involve coaching that client to go down a mental checklist of features and benefits that sometimes parallels a home purchase, sometimes not. In the case of hi-rise buildings in Chicago's Loop, considerations are these: 1) location - does this address give you easy access to your daily activities; 2) car parking - do you have a car, and if so where will you park it, and what price will you expect to pay to park this car; 3) monthly rental fee - can you afford it!!?; 4) VIEW VIEW VIEW - Chicago means Lake Michigan for preferred views from a unit's windows (no lake view? thumbs down!); 5) condition of the unit - are the kitchen and bathroom updated? Walls painted? Carpet clean?

My client found a perfect place to rent today, and was confident the moment we walked in the front door of the unit. This confidence came from having viewed many other units over the past several days, giving a basis for comparison. When this perfect place was revealed to us today, we knew it was "the one." Everything was right: location, price, views (this is a corner unit with lots of sunlight and attractive things to watch out the windows, not just the rooftops of neighboring buildings), good general condition, etc. We pounced on it immediately, got an application form and lease from the listing agent, and expect to tie down the lease tomorrow.

Client happy. Realtor happy. Job done.