Finding a rental after foreclosure and bankruptcy

[TShoot]

Am currently in Chapt. 13 bankruptcy and will be surrendering my house and trying to convert to a Chap. 7.

What did most landlords require/request from you when you tried to rent their property knowing that you have a bankruptcy and foreclosure on your credit history. I want to be completely upfront with them.

I left VM messages, emails and spoke to the real estate agents/owners for about 8 places and fully disclosed our situation. I make decent money and even offered to pay 3 months rent up front. No takers.

Was wondering what the experience was from other forum members. Better luck with private owners vs. going through a real estate agent? Did they request more months rent up front vs. the customary first and last months rent?

I don't really want to lie about our situation to private owners and the real estate agents all pull credit checks on you anyway.

Just wondering what creative things you folks may have done to secure a decent rental.

Thanks!

[Slingerland]

If I may, let me answer from a landlord's perspective. I've rented to tenants after bankruptcy and so far... with appropriate caution... it has been successful for both parties.

As a landlord, if you have filed bankruptcy I want to know "why" and I want to know "what have you done since?" In other words, have you paid your bills on time since filing? Have you loaded up on debt? Can you make the rent payment? Is you employment secure... let me repeat this one... is your employment secure?

Arkansas law doesn't allow me to take several months rent in advance, but the security deposit can be equal to 2x month's rent. I don't know Maryland's law, and "your mileage may vary" if you get my drift. In my case, for a C-7 or a C-13 in repayment I charge a very large deposit... 2x rent. But at the end of the first year, if all payments have been on time, I start crediting the extra deposit back a little each month. At the end of the 2nd year, the extra deposit has been returned to the tenant as a rent credit, and we go forward. (My average tenant stays several years.)

If the tenant ever pays late, the deposit stays high until the end of the lease. If I have to evict, the courts here will move very quickly (15 days or so from filing to sheriff ejection) and the 2x rent deposit will cover lost rent (assuming the property hasn't been torn up.)

Many "professional" property managers have too many properties to look at individual circumstances and simply go by their rules. No bankruptcies, no pets, etc. Individual landlords and property owners may be more willing, but it's on an individual basis. My advice: be open and honest with them. Yes, you'll get some rejection, but as you say, it's better than the landlord learning afterwards.

Good luck!

[TShoot]

Thanks Slingerland - appreciate the advice. Sounds like a very fair way to approach a multi-year rental with a C-13 or C-7 on your record. That's another kicker too - we have 3 dogs and a cat. That can be a deal breaker for a lot of landlords too.

[Slingerland]

You're right, the pets are a MAJOR issue... cleaning up urine damage can run into the thousands of dollars, and I know of landlords who bought new carpet only to have a tenant's "cute puppy" destroy it. I allow up to 2 pets, but with dogs, I am VERY breed specific.

You might want to find other homes for the pets... I know that's a hard thing to say (my cats are 18 years and 8 years old... they're like my kids...) but getting shelter for your human family has to take precedence.

[TShoot]

I agree but convincing my wife is a whole other story. If I was in a boat with the pets and it capsized, I would probably be the last one she saved. We have had our pets for a long time - over 12 years for 2 of them. If we have to get rid of them to get a rental, I'll guess I'll cross that bridge when it comes.

Thanks for your viewpoint - good have the perspective from the other side. Maryland landlords can only "legally" hold 2 months rent as a security deposit also.

Did you ever charge your tenants for 2 months rent for a security deposit plus a "pet" fee? If so, how would you charge them - per pet, a set amount?

Thanks again for all of your feedback.

[Slingerland]

Yes, I have a separate non-refundable pet fee. The fee is based upon the animal involved: $100 for a cat, $250 for two cats (they tend to spray). $150 for dogs under 25 pounds, $300 for dogs above 25 pounds. And I have a list of breeds not allowed: german sheps, huskies, pit bulls, etc. I've never had a tenant with parrots (yet) but I would treat them as dogs (big beaks, tend to chew.)

No other types of pets are allowed... no creepy-crawly snakes, spiders, etc. No fishtank above 10 gallons, due to both leaking damage and the sheer weight of water. My houses are built on crawlspaces, so the floors can't take the weight of big aquariums, waterbeds, etc.

[TShoot]

Great info - very informative. At least I know what seems to be reasonable and won't freak out if the landlord starts quoting figures like these. I'm sure the "YMMV" applies here but I appreciate the info.

[helpmeout]

I disclosed to the realtor that I filed bankruptcy. I even provided him with a credit report. I also told him that I had gotten served with a foreclosure notice. I don't know if he told my landlord that, I know that my landlord's realtor (who knew that I had declared BK because she is the one who gave me a market appraisal for the house) told the landlord that I'm a single parent who ran into some hard times and that my credit rating was high enough (the lowest is 610). I don't know if she told them more than that, but they can't claim that I didn't give full disclosure, because I did. If they have a beef, it's with the realtors who knew. BTW, I found an apartment the day I was served with a foreclosure notice. I wasn't expecting to and I probably could have had a couple more months rent free, but I also wanted to stay in the area that I was in as I have two school age children. Being honest and upfront is always best. A simple credit check will tell all.

As for the security deposit, in NJ, a landlord can only ask for 1 and 1/2 month rent by law. The ones who are asking for a pet deposit are violating the law along with those who are charging pet rent. But they probably get away with it because no one reports them.

[TShoot]

Thanks helpmeout. I agree with you. I have been upfront with all of the rentals I have tried to get. In this area, decent rentals go pretty quickly. So, if a landlord had to pick between a non BK person and one with a BK and foreclosure, I can see where I wouldn't be his first choice. I'll keep plugging away at it. I have some time so hopefully I be able to find something decent.

Thanks for all of the advice everyone.

[lichteda]

TShoot, consider what we did. After we filed 13, I started to look for a rental home (we have a big family). It took over a year for the bank to start forclosure... I saved every penny from the mortgage payment avoidence. I was sitting on $30k by the time we "had to move out"...

So... I found a land contract purchase. Beautiful home and a older couple whom we adore sold us the property. I had the 10% down and got the court (with creditor objections) to approve the purchase.

Sooo, we moved into a very nice home and will have it paid for in 10 years!

But it was hard to stock away the cash and work the foreclosure process to our benifit.

[TShoot]

Wow, that was awesome. I'm surprised that the court system would let you buy another house with the 30K you saved. No way my Chapt. 13 trustee would have done that. Kudos to you for pulling that off. It sounds like the absolutely perfect situation. With a Chapt. 13 and foreclosure on your credit, how did you even get financing? Was it through the owner? Most lenders I talk to say you have to be out of BK for at least two years before they will consider financing you and your credit score has to be above 620.

Also, did you keep the 30K you saved in your bank or elsewhere and did the Trustee know you had 30K saved? I always feel like if there is too much money in my bank account that they would increase my payments to the creditors in a Chapt. 13 thinking you had extra disposable income coming in from somewhere.

Going to be filing for a conversion from Chapt. 13 to Chapt. 7 in a couple of weeks and still feel like we need to keep our bank accounts low or else during the Chapt. 7 conversion process (fingers crossed) they would take any money that seemed excessive (like 10K+) and give it to the creditors. Maybe I am just being paranoid.

Also, my wife is afraid to stay the course until they go to auction our house. She is deathly afraid of being without a house so she wants to move rather quickly into another place. Me, I would sleep on an air mattress until they rang the doorbell to tell me to get out and save the money like you did so we could get something a little nicer or maybe a rent to own or lease/purchase type of deal. With enough down, I think it would be much easer to do.

Thanks for the advise!

[lichteda]

TShoot,

I did a couple of things. First, my motion included a withdraw from my 401k to use towards the house. Also, when we negotiated the plan, the Trutee wanted some of my "mortage avoidence". We did a good job of keeping funds for things like moving expenses, down payments etc. Additionally, I stayed in house much longer then we told the trustee we would... almost an additional year. So the plan was done and we worked as best we could.

As for financing, I doubt you will get bank financing... and why would you want it! Find a for sale by owner and have them hold the mortgage. I did pay a 1/2 point over market... but would have given much more than that.

Add to this, the mortgage credtor objected! My lawyer argued... "you cant tell my client where he can live"... hahahaha

And, we had Cheif Justice Rhodes (MI). A strong creditor judge!!!

Plan modification was approved to buy the house. No one knew we had the cash on had (post BK13). And I pulled a little out of my 401k to make things look good.

[TShoot]

Great - thanks for the clarification and detailed explanation of how the process worked for you. Helps me to strategize a little better knowing what could happen. And, I would gladly pay 1/2 point (or more like you said) for owner financing. I didn't think a regular mortgage company would touch someone in an active BK.

A couple of more questions if you don't mind. How did you set up this plan to buy a house yet not act on it for an additional year? Didn't they ask specific questions like how much the house would cost, what date you planned on moving in, where was it located, etc? Also, were you nearing the end of your Chapt. 13? You made reference to "So the plan was done" and I was wondering if you meant the Chapt. 13 plan or the motion you were granted to move?

Thanks lichteda!

[lichteda]

TShoot,

Ok, let me clear things up a bit...

First, our plan was approved in Feb09. We had filed in Nov08 and started to stash the cash from Sept08. Understand, not paying any creditor execept the trustee $200 per month. This freed up about $3000 per month for us.

In June or July 09 we started looking for rentals. After 30 days or so I found one... 8 achers, 3000 sq. with several out buildings. A beautiful house... abet, a bit older. (we have 5 kids and need a larger home).

I asked the selling agent if the owner would consider a land contract instead of a rental... Short story; yep, we made an offer of $250k 15 years at 5%. Seller wanted $259 and 5 1/2%. Offer was contingent on court approval (we fully disclosed our situation).

Took the court 60 days (almost ran out of time on the offer). Approved!

Told the seller we could not move in until Aug 1st and would make the first payment then!!!

So we had collected the "mortgage avoidance" since Sept09 to Aug10. The Trustee at plan confirmation wanted a bit of it (remember it was Feb10; so we told her we would be out in 30 days). The negotiations with her included moving expenses 8k (i think), down payments (she thought we were going into a rental) higher rental cost then what our previous mortage was ($2000)... and what ever else we could throw in. I think I had to send a 5k cheque at plan approval... or something like that.

After the plan was approved, I sat in the house for months waiting for the bank to foreclose. In MI, if you send the foreclosing bank a note after notificaiton, they have to wait another 30 days to start again (meaning notifiy them we were still in the house). So just did that a few times...

Sooooo, I left the dump house with $30k, used $25k as a down payment on the new place, and used the other $5k for painting an such on the new place before we moved in.

Key is, the court, trustee or creditor cannot tell you where you can live. Suck off the current home as long as you can and sock the money (all cash) away. I even had 10 oz of gold... again, all after plan approval.

Once you determin you are going to have to move, find a land contract, make an offer contingent on court approval... (you will have to explain were the down payment comes from). So get close to the seller... (I have several idea's if you need them).

Glad to help, just ask.

David

[TShoot]

Thanks David for the detailed explanation. Makes more sense now. I guess the owner of your current house was okay with waiting almost a year from the time you made him the offer until you actually moved in (August 2009 - August 2010)? How in God's name did you pull that off? Did he rent it in between on something like a month-to-month basis with another tenant?

I am interested in what you have to say about getting close to the sellers. Please PM me if you don't want to discuss on the forum.

Thanks!