As a Realtor in Big Bear Lake, working for the Tim Wood group, I list and sell a number of REO properties for one of the larger U.S. Banks. When I get the initial REO order from the bank, one of the first things I have to do is to go to the property and check to see if it is vacant or occupied. If it the REO is vacant, then we move forward with changing the locks and inventorying anything left at the property. The owner is then notified and given 18 days to retrieve his or her belongings. If they don’t retrieve the belongings after the 18 days, they are sold off at auction if the value is determined to be over $300.00. If the value is less than $300.00, then they are simply discarded at the local dump.

Every now and then, I find the property is occupied and that changes things to some degree. The first thing I need to determine once I find the REO occupied is who is living there. Are the people living in the REO the former owners of the property? Do we have family members of the former owner living there? Has the former owner rented the property out on a month to month rental agreement, or has the REO been leased out to someone? These are all questions that I must ask, and depending on the answers I receive, determine what I do next.

Let’s take a look at the different situations and also look at what happens at that point.

1) The former property owner or some of his family are still living in the REO property.

If the former owner is still living in the REO after it has been foreclosed on, one of two things is going to happen. Normally, I am authorized to offer what is known as Cash for Keys. The way that this works, is the former property owner is asked to vacate the REO property within a given time frame. If the property is vacated within that time frame as agreed upon, then I will make sure that there is a check waiting for them on the day that they agree to be moved out by. Some of the former property owners either don’t want to accept the fact that the home was foreclosed on and they refuse to move. In cases like this, the bank starts eviction proceedings against them. They find out that they still have to leave but instead of getting some relocation assistance, they have to move without any help.

2) The people living in the REO are renting the property on a month to month basis from the former owner.

The laws have changed when it comes to people who rent homes and the banks are all aware of They are all very careful about who is living in the REO and go by the law when the issue of renters comes up. Let’s say that the people living in the REO are renting the property on a month to month basis. As California is not a rent control state, most banks won’t recognize the month to month rental agreement. That being said, some cities have ordinances in place that will supersede the rent control issue, so always check with the local municipalities before doing anything.  The options for the renter are not that much different than the former owner. I will go and speak to the renters and explain what has happened. It has been my experience that a lot of the renters had no idea that the house was foreclosed on and, in fact they were still sending rent to the former owner. They are normally rather shocked and surprised to learn that the house that they have been renting has gone back to the bank. In these cases, the renters who are sometimes living from pay check to pay check are more than happy to accept the Cash for Keys and move. Because so many of these people live from pay check to paycheck, the biggest obstacle is that they don’t have the money on hand to move into a new home without someone helping them. The bank that I work with is happy to pay them money, but only after the property has been vacated and is clean.

3) Let’s take a look at the situation where you are staying in the REO property and you have a valid lease?

In some cases I will meet people who have leased the home or either 6 months or a year. In cases like this, the first thing I ask is if they can provide me a copy of the valid lease. If they can, then I also need to get proof that they are current in their lease payments. If they are in fact current on lease payments, they have a valid lease and they are not related to the former owners, they have a good chance of being able to stay in the REO property through the length of the lease. The bank will still ask me to offer them Cash for Keys in an effort to get them to leave. But if they don’t want to leave and the bank accepts the lease, then the REO property is transferred to the Rental department for the remainder of the lease.

The different scenarios that I’ve described and how they are handled are all based off of the policies of the bank that I work with.  Not all banks are going to handle things the way that this one does.  If you find yourself renting or leasing a home that has been foreclosed on, then check with the representative and see what they have to offer you.

In most every instance when I encounter someone other than the former owner living in the REO property, they seem very surprised at what has taken place. I know that when these homes are foreclosed on, paperwork is always posted on the property stating the date that the home is to be auctioned off. That being said, it is a little surprising to me that so many of these renters are caught off guard. In a number of cases, they have still been sending rent to the former owner after the property has been foreclosed on.

In closing I would like to say that if you are renting a property and you see documents posted on the door talking about the home being sold at auction. Be aware of the situation and look into it. Don’t just ignore it as it will not just go away. If you are not on a lease then you might want to start looking for another place to live. Don’t move out until you are contacted by someone who represents the bank because more than likely, they are going to offer you Cash for Keys.

If you have any questions about this article or anything Real Estate related in the Big Bear Valley, please feel free to contact me at my office. My Toll Free Number is (800) 468-6020 and my email is tony@tonycard.com