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Renters Can Fall Victim to Foreclosure Too

Home owners aren't the only ones who can fall victim to the foreclosure scourge.Thousands of renters are finding themselves suddenly homeless (see this CBS news video). Some lenders offer renters a "Cash for Keys" program others just put them out on the street.

To make matters worse, renters are also falling prey to foreclosure scam artists.

I talked with Doug & his wife. They had been convinced by one seemingly sincere man that he had just purchased the house and although the county records hadn't caught up yet showing him as the owner they could go ahead & pay him the $2000 security deposit along with the first and last months' rent. They did and moved in to the house.

Early one morning soon after they moved in there was a knock at the door. Standing there was a representative of the lender with legal paperwork showing that the house had been foreclosed on and the legal owner was the bank...the previous owner had been a single woman who had never rented the home to anyone.

Doug & his wife had not only lost their home but all of the security deposit and rent money - the "sincere" man was only posing as the landlord.

Once the legal notice appears in the newspaper the borrower isn't the only one at risk!

Posted by Lynnette Phillips Real Estate Consultant on 04/08/2008 11:26 AM

Comments (8)

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8 Comments on Renters Can Fall Victim to Foreclosure Too

APR

2008

Wow - what a terrible situation for a renter to find themselves in - all the more importance to do your home work and check the records to see who owns the home. Very sad story!

Lynette, I was aware that many investors are being forclosed on but had never thought about the renters side of the story. It's very sad. Thanks for the interesting Blog!

Christina, I guess to make it a true swindle the unsuspecting have to taken advantage of...most renters have no one on their side to consult which seems even sadder.

Thanks for stopping in!

Nicole, Until recently I had never thought of how the contractors are also suffering in this wave of foreclosures until I read the comment by David Saks responding to my post "Cash for Keys"
That was an eye-opener!

Thanks for your comment!

You have brought up a good point that I hadn't thought of. Thanks for sharing.

APR

2008

Joseph, It's still amazing how this foreclosure epidemic is like a snowball rolling downhill...not only are the borrowers so are the contractors, investors, renters, on and on.

Good to hear from you.

APR

2008

This is all so sad. Land Lords scamming their renters and getting the house they are living in foreclosed. That's a really horrible situation to have to deal with.

Amanda <3

Lynnette - I understand the story about the couple that was "duped" by the posing owner, but I think that I am missing something here. In Washington State, lease agreements survive the transfer of title of real property. Why would the tenants be evicted if the bank takes a property back from owner?

Amanda, Foreclosure can be very sad & of all the potential and unsuspecting victims renters seem to be in the worst position to me.

Ryan, from what I've read (and I'm not an attorney so this is just my interpretation) in many states, when the mortgage contract predates the lease contract, when the mortgage contract is dissolved as it is in a foreclosure, the lease agreement is nullified.

The part I'm still not understanding though is why do the lenders not have to give the tenants their legal rights as in 30 eviction notices.

Also I'm reading that the only way for the tenant to recover their security deposit is by suing the foreclosed landlord...does it make sense to think that this person has the money to repay the security deposit?

Thank you both for taking the time to comment.

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