A while back, we discussed the five pros and cons of renting out an underwater home. Now we’re looking at the flipside: the five benefits of renting housing from an underwater homeowner.
1. By far the biggest advantage renters get is price. The underwater homeowner wants the rental income on the home now to ensure mortgage payments are made. This can be one of the few situations in which renters have some significant negotiating power with their landlords. Another option that might work to both parties’ advantages is signing a longer lease, say two years, instead of just one at a lower rental rate. This way you get to pay less while the owner has more security knowing the rental income will keep flowing.
2. In most rental agreements the landlord is obligated to maintain the premises, and since this is the landlord’s former residence, there’s a good chance things will be in good shape. It is important, however, to ensure that you know whom the responsibility falls to. Underwater landlords might contract with a housing management company to maintain the property, or they might buy a “home warranty,” which is similar in that the landlord pays an annual fee and the tenant makes a co-pay whenever repairs need to be done. Obviously, the landlord will probably pass the home warranty onto you inside of the rent checks, but at least it gives them peace of mind.
3. As a tenant, you still run the risk of living in a house that goes into foreclosure. It’s very disconcerting to have a bank agent show up and tell you the house you’re living in is about to be repossessed and resold. Fortunately, the bank must honor your lease with the homeowner until the term expires. If you are in a month-to-month arrangement, the bank can give you 90-days notice that it wants you to leave. This can stymie your otherwise clever plan to rent an underwater home on the cheap.
4. On the plus side, if the house does go into foreclosure, it’s possible the bank will pay you to move out. Alternatively, you might be able to place a bid on the residence in a foreclosure auction and buy your residence for a fraction of the price. Or, the bank might enter into a rent-to-own agreement with you or allow you to buy the residence outright with a mortgage. It might be to the bank’s advantage and save it time and money reselling the property.
5. Although not a benefit of renting an underwater home, one important thing to do is ensure that the homeowner actually owns the residence. Obtain statements from the mortgage company and check the county’s property tax rolls to see if the landlord has been paying them. Basically, make sure that the landlord owns the place, isn’t on the precipice of foreclosure, or hasn’t already filed bankruptcy.
With some careful due diligence you can enjoy the benefits of living in an underwater house, but if you own an underwater home, then you should consult with an experienced Las Vegas bankruptcy lawyer to explore your options.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-803-9251 to set up your free consultation.