Renting to Foreclosee?

Question

Good morning all,

I had an apartment showing last night, and during the tour the prospect disclosed that she and her husband were losing their home to foreclosure after 12 years of ownership after her husband was out of work for nearly a year. He has since (recently) found new employment.

We will obviously verify employment as part of the screening process, but based on the details provided by the tenant, they exceed our income requirements. We anticipate that they may not meet our minimum credit score of 600 due to the foreclosure, and obviously the fact that foreclosure is the end result of not meeting your financial obligations is concerning.

I got an overall "good vibe" from the wife (husband not present for tour). She had a humble and gracious disposition and was upfront and honest about their situation. I do believe in second chances, but I also need to make sure I'm protecting my own interests if I choose to move forward.

[I'm in NH, and cannot require additional security deposit; I can require a co-signer, however].

What would you do in this situation?

Nathan Gesner · Answer

Do not rent to them. You're thinking with your heart instead of your head and it may come back to bite you.

Yes, he's making good money now. But you already know that if he gets laid off, he will quit paying and he will continue to live in the home for free as long as he can.

It's not a guarantee he will fail but there's an increased level of risk. You'll never kick yourself for rejecting them but you may very well kick yourself for accepting them.

Nick C. · Answer

The why has already been said above, but put me down for another emphatic no.

Anyone can be humble and gracious for 10 minutes. Especially when they want something...

Steve Hall · Answer

@Christopher Freeman

Lots of problems here:

• Why wasn't the husband there for the tour? Did you ask? Does he not care to see his new home, did he want to avoid answering questions, or is he always drunk and doesn't work?
• If you got a "good vibe" from the wife, but a "bad vibe" from the husband, which vibe would you go with?
• Why doesn't the wife work? If she was working, they could have prevented the foreclosure?
• You should have a policy on foreclosures. To me they're like evictions: 0 tolerance.
• If you had never met her, and just saw an application: Husband unemployed for 1 year, new job for last 2 months, wife unemployed, foreclosure, 600 credit score... would you consider renting to that applicant?

Ann Bellamy · Answer

Add my "No" to the list.

If both of them were working they should have had some savings.  That combined with her income would have held off foreclosure for long enough for him to get work.  Most people who try hard to get back on track can do stuff like Uber, fast food jobs, etc, to help make ends meet, these jobs are plentiful in this economy.   Certainly banks are not particularly eager to foreclose,  so the combination of lack of effort, lack of emergency fund, and slow banks getting to the completion of the foreclosure process means they likely did not handle the situation responsibly.  And they won't handle it well when they are your tenant, either.  In fact, they'll be even less motivated.

I phone-screen my prospects before I spend time showing, so my conversation would have revealed this and I wouldn't have wasted my time.  It's tempting to allow emotions to overcome your logical criteria, but I can assure you that you will get over that with a bad tenant.  A bad non-paying tenant is much worse than an empty apartment.

Dennis M. · Answer

Geez man ..are you really that hard up to get a tenant in there ? Pick somebody else . Its a risk not worth taking . Oddly enough I see landlords on here constantly asking if they should pick a  questionable “ red flag” applicant all the time . I’m no expert but Good marketing means more applicants . The bigger the pool of potential tenants the better the chances you have of picking up some good ones so you don’t have to settle for drug addicts , pedophiles , and various other losers . Work on marketing

Christopher Freeman · Answer

@Steve Hall, the wife does work in the same town as the rental property. The house in foreclosure is about 30 minutes from here and he works about 1 hour away -- I gathered that she was stopping by on her way home from work, but did not explicitly ask why he wasn't with her.

She earns a little over 2x the rent, which would not qualify her on her own merits as we require 3x. Her husband makes just under 3x, and between the two they are at 5x.

If I got a bad vibe from the husband, I would defer to that one.

I looked up the house that is being foreclosed. It's likely that her efforts alone would not have stopped the foreclosure, as the PITI on a property like that would be around 60% of her income.

I don't disagree that we need a policy on foreclosures. We'll likely add that to the screening criteria that we give every prospect at first business meeting. This is the first time we've encountered this particular type of applicant.

Renting to Foreclosee?

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