It’s rare for a rental home to go into foreclosure while a tenant is living in the house but, it does happen. Last Friday, a Sheriff pulled up in front of our rental house and handed me foreclosure papers. We rent. We pay on time every month. Lucky for us, we’ve been onto the whole shebang for a few months and were prepared for this. If you are renting, and suspect the mortgage isn’t being paid even though you pay your rent on time every month–here are some tips that I’ve learned.

{The following thoughts are NOT based on research, professionals or hard facts. They are entirely my ideas based on what’s happened in our particular situation.}

1. Gather information

Just because the owner misses one payment doesn’t mean the house is going to end up in foreclosure. But, I think most home owners are concerned about what’s going on with their personal situation and might not know the best time or way to tell the tenants something is wrong. No one wants a foreclosure and most people hold out hope to the very end that somehow, they’ll be able to catch up on their payments. Here are some signs that first alerted us that something wasn’t quite right.

  • Phone calls about basic maintenance issues are not returned
  • Notes taped to the door asking the owner to call the mortgage company
  • Very official looking envelopes coming to your mailbox addressed to the owners with a return address from an attorney

My advice would be to make every effort to communicate with the owner. Ask straight out if the house is headed to foreclosure and if there is anything you can do to help. Maybe the owners could try to sell the house and you could stage it for them in exchange for rent until you have to move. Maybe they’ll let you live rent free for a month or more while you look for a new place.

In our case, we leased our home through a leasing company so we could not contact the owner ourselves. All of our simple, strait forward questions were answered as vaguely as possible and, as of 30 days ago, we were even encouraged to sign another year long lease.

If you suspect the house you are renting is headed for foreclosure contact a local real estate agent and attorney to find out what rights you have as a renter.

2. Tell people

Don’t be afraid to ask for advice. Get the opinion from people you trust as to how to handle the situation. If you suspect you’ll need to move, tell everyone you know about what’s going on and let them know you are in the market for a new place to live preferably with rich owners who will never miss a monthly payment.

Be careful to not be too harsh on the owners. As upset that I am that the owners seem to be pocketing the money every month and not telling us, I choose to not spend my energy being mad at them. For all I know they have a mountain of medical bills, are facing a divorce or job loss. My guess is they are not taking vacations with our rent money. Focus on what you can control.

3. Take advantage of the opportunity and see it as an adventure

Maybe you weren’t planning on moving. Consider this a great chance to lower your rent. Right now, with the market the way it is you might be able to find an even better deal than what you currently have. Look for someone who’s house is on the market and has been for awhile. Chances are they might be willing to lease the house to you for the current mortgage payment. If they have lots of equity in the house, you could stand to get a great deal. Of course, there’s no guarantee a foreclosure won’t happen in the next house but, get to know the owner and their situation if possible.

Thirty days ago we gave our 60 day notice. It was a horribly hard decision. Like with tears and stuff. Our goal was to stay in this house for the next few years until we were debt free. We are settled, we don’t want to move. We move too much. But the thought of getting kicked out on some random day because of foreclosure was worse than the thought of moving. And we knew that if we choose to not sign another lease here at least we could control when we moved again.

After a day or so I even got excited about moving again. Turns out we found a fantastic home that I cannot wait to live in. I’ll tell you more about it as we get closer. The neighborhood is glorious and looking back, I admit, I’m secretly glad this happened to us.

Update: We moved in July of 2009, a few months after this post.  The house went up for auction one week later and did not sell.  As of December, 2009 it sits empty.  How sad.