…. San Diego Foreclosures Can Affect You Too!

With foreclosures hitting hard across San Diego County many renters are being faced with an issue that they have never had to deal with before ~ landlords facing foreclosure. The media has been so focused on the extent of the mortgage and real estate “crisis” that there has been little press coverage on the issue. Often many renters don’t find out there is a potential “issue” until it actually happens, a notice of foreclosure is mailed to the house and they are given notice to move out from the lender, sometimes the move out is demanded immediately.

So what’s a renter to do? Well that’s the unfortunate part… there really isn’t much.

Generally speaking, once a San Diego property goes into foreclosure the lease the tenants had with the previous owners becomes null and void. Most states use the “first in time, first in right” rule that if the lease was signed into agreement after the mortgage was recorded; the lease will be wiped out at foreclosure.

So the renter is faced with the fact their rental will now go to month to month with no way of knowing when the eviction notice will come. Generally sooner than later, most banks would prefer the property to be vacant and do not want to act as landlords. When asked to go, you better pack up and obey the request. The bank can choose to file an eviction lawsuit on the renter should the renter decide not to move out. An eviction lawsuit is ugly and the renter will not have legal defense, as well as if convicted can make future renting next to impossible.

Should a renter decide to go after their original landlord in court, they would have in most cases a good argument. When a landlord defaults on their mortgage and allows their property to go into foreclosure they have broken the terms of the rental agreement with their tenant. Thus the tenant is able to sue the landlord for damages and losses including their security deposit caused by the foreclosure eviction. Such a case would be brought to a small claims court. Remember, the landlord foreclosed on the property because they could not keep up with the payments. So the actuality of a tenant getting repayment for losses via a lawsuit may be minimal. However, if one proved to be determined enough they just might be able to eventually get some type of retribution for their losses.

Moral of the story … San Diego renters today must beware of the potential risks. When looking to rent, perhaps the best option is to not rent directly from an owner and instead rent in a large complex that may not have been financed with a risky mortgage of the past. Better yet, perhaps now is the time to calculate what you could afford to actually buy and see if the numbers make sense.

With rapidly decreasing home values it may be just the right time for you to transition from a tenant to a homeowner. Talk to a trusted mortgage advisor or San Diego real estate agent and see what makes the most sense for your future.

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