So what happens if you are a renter, you have paid your rent, and you learn that the property is subject to a foreclosure? Instead of panicking and filling your mind with images of an eviction, you must work quickly to learn what your options are and how far along in the process the foreclosure actually is. Generally, when a property is the subject of foreclosure action, the foreclosing law firm will send a notice to the residents or tenants of the property notifying them of the sale date. If you find yourself on the receiving end of this notice, you must immediately contact the foreclosing firm, and check when the foreclosure date is scheduled. The law firm will tell you whether the date has been scheduled or if it has not been set as of yet. It would be in your best interest to contact the law firm at least once a week to learn when and if the date is set.
Reach out to your landlord and ask what, if anything, will be done about the impending foreclosure sale. The landlord may have a strategy in place that may remedy the foreclosure. But you must get in contact with your landlord and hopefully she will be honest about her plans. In the event that the foreclosure happens and you do not have enough time to pack and move, you must learn if the property was sold to an investor at the auction or if the bank purchased it back.
You can learn this by calling the foreclosing firm that conducted the sale, or by searching the foreclosure court records and reading the Notice or Report of Sale. This document should tell you who the purchaser was at the sale.
If the bank purchased it back, you have a greater chance of buying a few months before you have to move, and in some cases, the lenders/servicers honor the remainder of the lease or rental agreement that you had with your previous landlord. If this is the case, you are in luck because it gives you more time to plan your move.
Some renters may decide to make an offer to buy the home from the lender at a reasonable price. However, be cautioned that neither you or the bank can engage in any dialogue about the purchase of the home until the house is foreclosed upon and the landlord is divested of interest in the property. See Foreclosure 101 section-read up on ratification.
In the event that the property was purchased by an investor, this person normally does not want to honor the prior lease agreement. He or she may want immediate access to the property and he will do this by asking you to leave or by filing an eviction proceeding against you. In any event, should the new owner knock on your door and introduce himself to you-negotiate with the move time and do not pay him rent unless a new lease agreement is in place and you have verified that he is in fact the new owner of the property. (Verify by searching land records and look for the recorded Deed that has his name as the owner.)
Some lender/servicers or investors after the sale may send a Real Estate Agent to talk with you about a fair move date. Within that conversation, the agent may offer you "cash for keys." (Cash for keys is a payment that the lender/servicer or investor is willing to give to you if you move out on the agreed upon time, leaving the property in broom swept condition.) Cash for keys can sometimes be negotiated and some agents have offered between $500.00 and $5000.00. These payments often help the renter with the moving cost.
Click on the Baltimore Homeownership Preservation brochure that outlines renters rights in foreclosures at: http://www.mdhope.org/documents/RentersInForeclosureBrochure_read.pdf/.
Also log onto http://www.peopleslaw.org/housing/ltenant/legal%20info/foreclosure%20of%20prop.htm for more information as it pertains to tenants rights in foreclosures.
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