I've learned firsthand that foreclosure can have a devastating impact on renters. Even the perfect tenant, who pays rent and other household bills on time and cares for the home, could end up racing against the clock to move out before the sheriff comes calling. Worse, an eviction could lower that ideal tenant's credit score, impacting the potential for homeownership and future rental opportunities. I was that ideal tenant. In today's foreclosure-filled market, other renters need to read my story.
Four years ago I discovered the quaint community of villas in Florida because a friend lived there. It was the kind of place where neighbors gathered around the community pool most days of the week. When I first eyed the 1,200-square-foot villa, it was filled with a friend's belongings. He'd recently married and moved away, and the place needed an owner. I wanted to buy the home, but wasn't in a position to do so (I had to clean up my credit, which was damaged after a messy divorce). My friend and I discussed our options and I decided to rent from him while I worked my way toward eventually purchasing the property.
I felt right at home, with the 20-foot vaulted ceilings, two screened porches, and living room large enough to house my monthly gathering of friends. For three years I paid my rent and bills on time and enjoyed renting from my friend. We had a harmonious landlord-tenant relationship, and I was slowly but steadily improving my credit -- with the goal of eventually purchasing the home from him. I happily put some work into the house and took care of some repairs myself. After all, it would be my home someday.
The foreclosure notice arrives
I came home from work one day to an unfamiliar car parked in front of my house. The driver approached me with a foreclosure notice. Random thoughts raced through my mind: "This can't be happening... I just painted the place."
Plan to save my home
The first thing I did was contact the bank. They couldn't speak to me because I was not the owner. So I contacted my friend, the owner, who admitted to using the rent for his own living expenses. He assured me it would take a long time for the foreclosure process to complete and that he still intended to sell to me.
My home was listed for sale to forestall foreclosure, while I stayed focused on my credit score. Three months in, the homeowners association sent a letter demanding the dues as the owner had failed to pay the monthly HOA fees. The owner emailed to see if I was ready to buy.
Relief in sight
Renewed effort with mortgage companies was promising and I obtained a 30-year fixed loan commitment. The payment was actually going to be less than the rent I'd been paying. With relief I submitted an offer for a full-price purchase of the home.
A week went by and no word from the seller's agent. After several inquiries, he emailed that I should deal directly with the owner. After another week, the answer to my offer was an eviction notice from the owner's attorney!
I went to court armed with the purchase documents and emails from the owner stating his intention to sell the house to me. Though the owner was not there, his attorney made it clear he was not interested in selling. I was stunned as the judge ruled in favor of the owner; it was apparently legal that he lead me, as tenant, to think I might actually be able to buy the home (in order to collect rent from me) and then evict me so he could walk away from his mortgage obligation.
All my savings, earmarked for a home purchase, now went toward moving expenses, and the credit I worked so hard to improve (by over 200 points) was now below the 620 needed to qualify for a mortgage.
I had three days to vacate.
Moving on from the home -- and the friendship
Friends banded together and within two days my house was packed and put in storage and I moved in with my son until I could find a new place to live. I did find a townhouse to rent, but my new place cannot accommodate my monthly gatherings with friends. Due to the eviction, I have limited rental options.
I learned some hard lessons in all this:
- Never rent from a friend. You lose a friend and gain an enemy.
- Move at the first sign of foreclosure -- don't wait for an eviction notice. An eviction will affect your credit and rental options in the future. Don't make any assumptions based on what the homeowner says; just find someplace else to live right away.
While it might be hard to walk away from the place you call home, it's much harder to do it in three days. And the cost to your emotions, your credit, and your bank account is just not worth the fight.