With a foreclosure, everyone loses. The homeowner, is not the only one in many of the foreclosures going on right now, that loses. There is also a real impact on renters.
The problems are even worse for a renter, as he may not even know the home they rent is heading for foreclosure. The homeowner, may have already received many notices of this impending foreclosure, but the homeowner, may not have told the renter. The renter may be totally unaware of the situation. Even if he is a good tenant, and pays the rent on time, everything changes when the homeowner loses the house.
The lender does not usually want to be a property manager, even for a short term, they want everyone out, in order to try and sell the house. When the house goes for foreclosure auction, they want the biggest market they can find, and that is a purchaser who wants to buy the house to live in themselves. The market for investors, willing to continue renting the house is much smaller.
Therefore, sometimes the only way a renter finds out, he has to find a new place to live, is when the eviction notice shows up because the property is in foreclosure! It is best to keep in good contact with the landlord, so that you can make alternate arrangements, if you have to leave.
Another serious issue that these foreclosures are creating, is lack of rental properties. As more and more homeowners are forced to leave their homes, they turn to renting for the short term. This now creates a market of renters looking for somewhere to rent.
This could force a homeowner or the renter to move to a more expensive area, or be faced with high rental fees on a home that is not as good as the one you are in now. Many landlords are raising rents, as their mortgages come due and head upwards. Not a good situation all around.
But despite all this doom and gloom on the real estate front, if you are a renter, you should look at all your options. If you rent a unit in a multiplex building, or an apartment building, and you have heard that the owner is foreclosing, then you stand a chance that the building may be purchased by another investor, and they are going to want good tenants. If you are a good tenant, then chances are you will be able to remain in your building.
But, if you rent a single family dwelling, and the homeowner or landlord is facing foreclosure, then you had better start looking for somewhere else to live. Since the bank is going to want to sell this house right away, and when it does sell, chances are it will be someone who wants to live in it. So, rather than waiting until you get that notice to basically "get out", you should start doing your homework now. But if you are lucky enough to have a good income, and absolutely love where you are living, maybe you could approach the homeowner. If the homeowner, is in "pre-foreclosure" where he still has some say over the property, you could approach him to see if you can purchase the property for a good price rather than renting it.
A friend of mine did this, and didn't even have to come up with a down payment. The price was right, and he just paid all the legals, no real estate fees etc. He qualified for a mortgage, and the homeowner sold it to him at a rock bottom price, rather than face a horrible credit score by foreclosing. He was able to get a house he could afford, and the bank was not going to be left with another empty house.
If this is what you want, and love the area, you may just get a good deal, as many homeowners, do not want their credit score ruined by a foreclosure, so they may just offer it to you for the lowest price possible right now. If this is the case, you could look into renting a room out to help with expenses, but this way you get to stay.
The renter tends to get shafted in these legal matters between lenders and homeowners. But you can't bury your head in the sand, you need to protect yourself too. The first thing you should do, if possible, is cut right back on other expenses, and save enough cash for first and last months rent somewhere else. Do your homework, see what type of rent you will be faced with elsewhere, and start saving now. Even if you are not faced with an eviction notice, it is good practice to have some living expenses tucked away.
Don't forget to allow for moving, and packing expenses.
If you know for sure that your homeowner/landlord is facing foreclosure, then this does not happen overnight, it usually takes a few weeks, so if possible, use your security deposit for your last months rent, as many renters are being evicted without getting their security deposit back.
So, yes homeowners are having a hard time with foreclosures, but there is a second wave forming, and that is of the renters, that rent houses of these homeowners. There are many investment houses, that were purchased with the sole purpose of renting, when the real estate was in its hay day. Many of these homeowners, through job loss and the economy and interest rates, are being forced to either sell these houses out from under their tenants, or face foreclosure.
So, renters, you need to protect yourself, and if possible be totally aware of your situation. In the case of foreclosures, be ready for just in case you have to leave. Save as much money as you can, and hopefully the transition will be smooth for you. Knowledge is everything. You don't want to wait until you are given a few weeks to get out. Find out where you stand now.