So, I was reading an article the other day that talked about the possibility of home owners becoming renters in lieu of getting kicked out of their homes when foreclosure happens.

It was an interesting concept to me and I thought I’d write about it.

So, right now, we all know there are too many foreclosed houses on the market and the Twin Cities market is no different. Even the best neighborhoods like Crocus Hill, Highland Park, Macalester Groveland, Lake Calhoun and Lake Harriet are not immune to it.

If you have a foreclosed home in your neighborhood, you know it is not usually a pretty picture. Typically, a homeowner who gets foreclosed on is not a happy camper and in their mind, why take care of a house that is only going to be taken away from them? So, what happens is that the house becomes run down, the yard turns into a weed bed and in general it becomes an eye sore to the entire neighborhood. Once the owners move out, it gets even worse because signs get posted about vacancy and water shut off, etc…
Bottom line, NO ONE wants their home to be foreclosed on and neither do any of the neighbors.

SO…..what would happen if the bank gave up on the entire LONG process of foreclosure and simply made an agreement with the current owners that they could stay living in the house as tenants paying rent?
Maybe the bank would negotiate with the owners to come up with a “rent” amount that would be affordable for them and still work out for the bank as well. Then, hopefully, the “owners” turned tenants would stay in the home, continue to care for the home as though they owned it and we’d end up with less vacant, run down homes.

Of course, that is the ideal scenario.

The issues that could arise are many:
- The bank is not in the business of being a landlord so who will take over these duties that go along with owning rental properties? Would a new bank owned property management department get set up?
- Who will pay the utility bills and what happens if any of these go unpaid?
- What happens if the rent does not get paid?
- Could the bank set up a sort of Contract For Deed or Rent To Own situation?
- What happens if repairs need to be made – new roof, furnace, broken window, light bulb, etc.?
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These are just a few questions and I am sure there are many more. I don’t have all the answers but I’m sure this topic could spur some interesting conversation.

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Jen McKinnon
Realtor/Investor
MN Real Estate Team

612.384.1073
jen[at]mnrealestateteam[dot]com