All Forum Posts by: Denise Evans

I currently live in Alabama, but I'm a Texas-licensed attorney. Texas uses non-judicial foreclosure via a trustee's deed. Liens filed before the filing of the mortgage being foreclosed will remain on the property. Liens recorded after the mortgage that is being foreclosed will be stripped off the property. HERE is a link to an excellent article written by a Texas attorney.

We are all familiar with issues related to service animals (specially trained and certified dogs) and assistance animals (such as emotional support animals of any species or breeds).

This post suggests a compromise response to those issues.

Landlords who prohibit animals do so because they

• fear the damage that might be caused by those animals, 
• know it is highly unlikely they will be able to fully recover compensation from the tenant if there is damage, and
• fear litigation if the animals harm someone. 

Other landlords allow pets, but have strongly worded pet clauses or pet addenda to provide protections. If a tenant has an emotional support animal or service animal, none of the "pet" language applies, though.

You should create an Animal Addendum, or Animal Clause, that applies to all animals, whether they are pets or not.  You can't make it more expensive for the disabled person, such as charging a higher rent, additional deposit, or animal-related non-refundable fee. You can require ALL tenants to exercise responsible animal ownership, protect the property, minimize chance of harm to other people, and maintain acceptable noise levels that do not interfere with neighbors' enjoyment of their own property.

A well-written animal clause will require the tenant to:

• Provide proof of current shots, if applicable
• Provide proof of flea control medication, if applicable
• Disclose the name and contact information of the veterinarian caring for the animal, if applicable (hamsters, for example, probably do not have veterinarians)
• Keep dogs in a crate or on a leash at all times when outside the dwelling
• Use a pooper-scooper, whether on the leased premises or another's property
• Vary locations of dog urination, so as not to burn shrubs or lawn
• Empty cat litter boxes daily into outside receptacles
• Control  excessive barking that disturbs the neighbors
• Allow monthly inspections for pet damage
• Immediately clean any pet discharges and immediately report any damage
• Assist with Twice monthly HVAC filter changes for long-haired animals
• Keep pet food supplies in pest-proof containers

I think that if you approach the problem in this manner, you will be more comfortable complying with Fair Housing laws.

Alabama is relatively landlord-friendly.  Maximum 1 month security deposit; some states allow more. But, you can collect all the prepaid rent warranted and able. Fair Housing laws mirror federal laws, nothing additional. You must give 7-days notice of default and opportunity to cure, but if they default 4 times in 12 months, you do not have to cure the 5th time. With careful attention to deadlines and doing everything exactly when you are able, you can get a default eviction order in 30 days, and turn-out fairly quickly after that.  Eviction trials have to be set as priority cases.  Motion for summary judgment is available, so continuances usually not a problem.  Most claimed landlord defaults allow the tenant to terminate the lease, NOT to quit paying rent. If tenant appeals eviction, it must pay all past due rent into court or the eviction can proceed. "Nail and mail" service available for the eviction order itself, although you must get actual service if you are suing for damages.  Judgments are good fro 10 years and can be renewed for an additional ten years. Alabama does not have generous bankruptcy exemptions.

@Ron S., thanks for the input. I agree with you. And, thank you for the info about the 12.5% discount rate. Also, as you pointed out, things are different with regional banks and local banks. A local bank is MUCH less likely to forgive the deficiency, and much more willing to foreclose and take their chances on an REO sale. A regional bank is somewhat less likely to forgive the deficiency, but usually will do almost anything to avoid taking the property into inventory.

Ask your lawyer to take a look at UNION COUNTY UTILITIES AUTHORITY, PLAINTIFF, v. PAUL JOSEWITCH, et als.  Superior Court of New Jersey, Law Division, Union County, 269 N.J. Super. 218; 634 A.2d 1378; 1993 N.J. Super. LEXIS 887

Hi,welcome to BP.  I am the recognized tax sale expert in Alabama. If you have specific questions, I'm happy to help out, @La Ferria T.  Denise

The lease should cover just the things related to possession, term, money, and default. Very clean.  By law, rules have to be in a separate document, but can be changed from time to time without the tenant's consent. I have a Rules, Regulations and Fee Schedule I would be happy to share with you. Contact me off forum, via email on my website, and I'll send it to you.

In Alabama:

The Agreement for Entry for Routine Maintenance and Inspection must be separate from the lease to be enforceable.

The Agreement to Show During Last Four Months, without the need for notice or consent, must be separate to be enforceable.

Other addenda must be separate, some I advise be separate, because they don't apply to all tenants. Things like an Animal Addendum apply to only some tenants.

As far as multi-defaulting tenants, the Alabama law changed in 2014 and now allows you to kick out a multi-defaulting tenant. If a tenant defaults four times in a 12 month period, you do not have to allow them to cure the fifth time.  Sounds like you just need to sit out this problem tenant until the end of July, and then know better next time.

As other people have recommended, you should send the notice of default every single time you are able, as soon as you are able.

Good luck!

The discount rate is market driven, @Wayne Brooks. I'm in Alabama, which used to have a 1-year post-foreclosure right of redemption, until the last legislative session. It depressed REO prices significantly, which probably fed into the high discount rate. In your market, the discount rate might be smaller, but the analysis is the same. Plus, you have to control the appraisal process. About two years ago I discovered banks starting to use an appraisal AND their own AI internal valuation, and the AI always trumped the appraisal. In that case, you have to appeal, protest, and produce your own comparable competing properties listed for sale, and comparable recent sales. If it goes that far, I usually get the valuation I want, and all else flows from that.

@Wayne Brooks, it's not a theory, it's how the computer models are created. It is purely an NPV--net present value comparing two alternatives-- analysis.  An NPV that is positive, 0, or only slightly negative will be approved. An NPV of 0 means the offer exactly meets investor requirements. A positive number is better than investor requirements, and a negative number does not meet investor requirements. There is usually a range of negative NPV values that will still result in short sale approval.

I typically price my offers 15% to 20% below market, and almost always get approved. I was simply explaining WHY that works.

I'm a former banking lawyer, and former lawyer for the FDIC closed-bank division. I can tell you, from the inside, how banks evaluate short sale offers. Since then, I've successfully negotiated many short sales to buy properties at huge discounts.

Understanding the process starts with simple math.

What is the present value of a foreclosure, which is the only real alternative to approving a short sale. The present value of a foreclosure is the amount they will take home at the closing table after an REO sale, minus foreclosure expenses, holding costs (taxes, insurance, HOA dues, property manager, maintenance, etc.), and then discounted to present value using a VERY hefty discount rate.

If a property is worth $125,000 today, then the bank will assume it will be worth the same amount in one year after a foreclosure. Let's suppose that all the expenses will cost the bank $25,000, so they will net $100,000 in one year, upon a sale.

The question then becomes, what amount of money today, invested at 12% interest (the discount rate) compounded monthly would yield $100,000 in 12 months? The answer is $88,744.92. The discount rate is how the bank takes into account market changes, stigma discounts for foreclosure properties, uncertainty regarding valuation and expenses,, and the loss of use of their money. For foreclosures of entire subdivisions, I've seen discount rates as steep as 22%, calculated over a 7-year sell out of the lots!

For our example property, the bank will approve any short sale offer that will net them $88,744.92 at closing.

In reality, because neither the $125,000 appraisal, nor the $25,000 in expenses are firm numbers, but simply estimates, the bank will accept slightly less than $88,744.92. Money at the closing table after a short sale is "for sure." Money after a foreclosure and REO sale is speculative.

So, in this example, the bank might approve a short sale offer that netted them $84,000 at closing. Which means, in most markets, you can buy a $125,000 property for around $91,300 if the real estate commission is 6%.  If you have a real estate license and are willing to waive a commission, and if the listing agent is willing to accept only a 3% commission, then you can buy that same property for around $88,400.

In my opinion, that makes short sales the best foreclosure investing strategy.