Banks are becoming landlords!…Kinda?!
Today, more and more banks are becoming landlords. They are becoming landlords on properties that they take back in foreclosure. Many banks are allowing families that lost their house to foreclosure to remain in the house even after the sale. Some families are staying in their home six months, a year, or even two years after the sale date. The reason banks are doing this is that ultimately it saves them money. Let me explain…
Banks have an oversupply of home inventory. Banks have more homes than they ever expected to have in their REO inventory. The banks are not set up to manage this many homes and so what they end up doing is simply not managing the homes. The banks are not cutting the grass, the banks are not paying the water bill, and the banks are not maintaining the properties in any way shape or form. Local villages and cities have gotten tired of banks not maintaining their properties (and found a new revenue stream) and so they are starting to charge fees to the banks because they are not maintaining the property. Therefore, a bank may take a house from a homeowner in January and not do anything with the house until October. However, when they go to sell the house they see that they have several thousand dollars in fees from the city or village. The banks don’t want to pay these fees. So to stop this, they allow the previous owner to stay in the house and therefore if the house were not maintained then the previous owner would have to pay the fees.
When the bank finally decides that it doesn’t want to take the house back, they proceed with an eviction. Then they don’t have to worry about any fees when it’s time to sell. Some banks do this process formally by giving the previous owner a lease that allowed them to rent on a month-to-month basis until the bank decides what to do with the house. Other banks simply don’t file for eviction and then the owner is never formally asked to leave the house. This is dangerous for the homeowner because it does not provide any kind of security and they can be charged fees by the bank and the city, which they may have to pay later in court.
If you find yourself in this situation, the best thing you can do is talk to your bank and work out a formal arrangement. It is better to have the peace of mind of knowing where you are with the bank and finding out what options you have.
Until next week…
