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Property Managment Benefits Tenants Too!

By
Services for Real Estate Pros with Classic Property Management

   I have written several blogs about how home owners can benefit from the services of a property  management company.  There is no better way to screen and place a tenant than to have it done by someone who does it all the time.  After all, these guys do get paid for something, right?  We are in a whole new era now.  You can not simply trust someone to rent your home based on the fact that they are an "honest looking guy."

   For this blog however, I would like to focus on the other party to a lease agreement...the tenants.  As far as the market goes, I live in an area with one of the highest foreclosure rates in California: The Antelope Valley.  You can pretty much point to any place on  a map of the valley and be assured that you are covering several bank owned homes with your finger.  Homes that sold two years ago for $400,000 are now on the market for $220,00.

   So what does this mean for tenants?  Here come the "Rent Skimmers!"  For those of you who don't know, "rent skimming" is a name for the act of collecting rent on a home that you are defaulting on.  We have gotten several calls from people who are looking for a place to live due to the fact that the owners of the home have defaulted and gone into bankruptcy, foreclosed, etc.

    I have spoken to many Antelope Valley renters recently who have told me that they were paying rent on a home for months without realizing that the owner of the home was not holding up their end of the deal.  To make matters even worse, these owners are running away with the tenants security deposits too!  I spoke with a woman the other day who paid a $2500 security deposit on a home only to be forced out when the bank came to take possession 6 weeks later.  The owner had skipped town with her two months of rent and the entire $2500 deposit.

   Just when all hope seemed lost, she found that there was a better way to rent.  Most property management companies use the same system that we do here at Classic.  We find that it is a much better idea to hold onto the security deposit in our company's trust account and remove temptation from the owners.  That way, there is no danger of anyone being ripped off.  A third party that is bound by laws and ethics is a great addition to any rental agreement.

   The road to happiness in today's rental market is filled with land mines and pot holes.  However, if you take the necessary steps, many of these dangers can be avoided!

 

For more information on dodging pot holes and land mines, or for other solutions to today's rental market, please check out our website by clicking on the Classic logo to the right!

Show All Comments Sort:
Kelly Sibilsky
Licensed Through Referral Connection, LTD. - Lake Zurich, IL
Hi Jonathan - great information for a would-be tenant. They need to be very careful who they rent from!
Mar 31, 2008 10:33 AM
Robert Machado
HomePointe Property Management, CRMC - Sacramento, CA
CPM MPM - Property Manager and Property Management

Jonathan,  I am a California property manager too.  One thing to know.  If you hold the security deposit, which is the owners money during the tenancy, they can demand that you give it to them at any time and you would have to do just that.  The deposit is the owners money during the tenancy.  The property management contract could be terminated if your policy was not to allow that, but the owner could still get the funds from you at any time. 

The bad news is that a property manager cannot protect the tenant from a bad owner or a good one if a foreclosure happens.

Apr 08, 2008 05:28 PM
Sandy Shores FL Realtor®, Melbourne Real Estate
M & M Realty of Brevard Inc. - Melbourne, FL
Brevard County Real Estate, Florida's Space Coast
We hear the same story 2-3 times a week, of paying tenants being faced to leave, due to foreclosure.  Thanks for sharing!
Apr 09, 2008 12:11 PM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

The same things you describe here are the exact reasons I use a third party escrow service for all my lease option and owner financing sales.

Apr 11, 2008 11:04 PM
Peter Nikic
Broad & Bailey Realty LLC - Valhalla, NY
Jonathan - very interesting, never heard of this before. thanks. In the NY area, we don't have much of this foreclosure stuff going on, but it's good to know, just in case.
Apr 21, 2008 06:41 AM
Mark A. Moore
RE/MAX Alliance - Referral Co. - Virginia Beach, VA
Virginia Beach Real Estate

Hi Jonathan,

We sometimes have the good fortune of getting a tenant who pays 6-12 months rent in advance (NATO Joint Forces Command officers).  Owners sometimes complain because we keep the rent in an escrow account until payable.  This is a huge benefit to the tenant if the owner happens to default, and I think it is state law.

-Mark

Apr 22, 2008 11:06 PM
Jo Newton
Rentals Made Easy Mgmt Group - Conyers, GA
Realtor & Property Manager

Great blog!  For my lease purchases, I always require the seller to provide a mortgage statement quarterly showing the mortgage is current and the seller is not in jeopardy of losing it (no matter whom I'm representing). I'm considering doing the same for the properties that I manage to cover everyone.  Of course it would be confidential information kept in my file.

Jo Newton 

Apr 30, 2008 01:03 PM
Chastity Guevara
Camelot's Quest Realty - Casa Grande, AZ

We have a lot of that going on here in the Arizona area also.  My company policy is also to hold the deposit and if a tenant pays advance rent we also keep that in trust until it becomes due.  I receive calls all of the time from people renting from owners with these circumstances and wanting to know what can be done to retrieve their funds.

I have also been on the other end...I rented a house from and individual a few years ago before getting into Real Estate and Property Management and have since discovered that many of things written into my lease were illegal in the state of Arizona.  I think you are absolutely right in saying that property management benefits the tenants as well as the owners.

Sep 01, 2008 07:50 AM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

If my mgmt is cancelled, I don't hand over the tenant's deposit to the property owner UNLESS I have a signed written RELEASE from the tenant(s) to do so....this money is actually still the tenant's that is held FOR THE BENEFIT OF ADHERENCE TO THE TERMS OF THE LEASE and it is not the property owner's at any time during the lease term.   Smart tenants elect to have me to continue to hold these funds and when they vacate, the deposit check is made payable to the tenants AND the property owner and sent to the property owner.

MARK - yes, holding the funds (pre-paid rent) until it is DUE under the lease is VA state law.  The way around this is to have rent payable to owner when paid and note any discount for bulk rent payment in the lease agreement.  I urge tenants to have auto payments from bank rather than pay in bulk/in advance.

More property managers need to be concerned about CYA and stand up to bullying from owners who demand monies.....make sure you know your state law and ask an attorney BEFORE you release a tenant's deposit to ANYONE other than the tenant or escrow in the event of the sale of the property.

 

Sep 01, 2008 11:18 PM
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
850-476-4494 - Pensacola, Pace or Gulf Breeze, Fl.

Here in Florida the monies belong to the tenant and controled by the contract. Property managers here use what they call a specific POA which most landlords don't have a clue what their rights are.

Oct 27, 2008 12:14 PM