Atlanta Real Estate Agent Concerned about Landlords Not Paying the Mortgage
I was reading a post from another agent with Solid Source Realty, Inc. sharing his concern about property owners failing to pay their mortgage while the tenant continues to pay the rent on time. He suggested credit reporting for Landlords to insure that they were credit worthy.
As a professional property manager and a member of NARPM, my colleagues and I have often discussed this issue especially in the last 18 months. As the economy continues to decline, we are finding more and more property owners not living up to their responsibility and leaving the tenant high and dry with little time to regroup. Typically their security deposit is non-recoverable as well, so there is no money to relocate and in today’s economy – every dollar counts.
This is why tenants should not rent for an individual owner, but a professional property management company. At least a management company should be a firm of licensed real estate agents who holds funds in escrow and is not distributed to the owner. In addition, there is typically a provision that states that once the foreclosure auction is advertised, we can withhold the rent until the owner clears up the foreclosure.
One thing tenants need to be aware of is that there are a lot of owners that can get a stay of foreclosure action through working with the bank for a loan modification. So just because notices of foreclosure show up, doesn’t mean that the house will automatically go into foreclosure, but you should contact the owner or property manager right away to determine the best way to proceed.
Our firm always looks through the major foreclosure reports to see if an owner is listed. If so, we contact the owners and work with them to see what can be done to protect the tenant and figure out expectations. While a management company works for the owner, we are bound through license law to treat all parties honestly, fairly, and provide accurate information. What this means is that we will work with all parties to insure the best possible outcome.
If the worst does happen and the property does go into foreclosure, we can typically refund the security deposit and sometimes part of the rental amount depending on the situation. Of course there are certain conditions that need to be met in order for this to happen.
While there is a lot of press about the owners that allow foreclosure to happen when a tenant has been paying rent, a more common issue is an owner who has allowed a tenant to become behind on their rent. Most often – although not always, a tenant will not pay and this produces additional financial pressure on the owner having to carry two mortgages while the tenant continues to stay in the property. There is very little discussion about this issue. It would be nice to be able to track those instances along with the owners who blatantly don’t pay when the tenant has been paying all along.
June 10th, 2009 at 1:38 am
To maximize income and minimize losses, owners should consider the advice of local real-estate leasing professionals and be aware that rental rates are not a function of the owner’s mortgage payments,
but one of supply and demand. This realization should ensure a better outcome in this very different market.