Financing in Auburn>Question Details

Funjunk, Renter in Auburn, CA

I'm just wondering why home-owners that are faced with foreclosure don't just rent out the property and find other less expensive or free (stay with

Asked by Funjunk, Auburn, CA Thu Mar 31, 2011

family) places to live until they get on their feet again? And then I'm also wondering why the banks aren't being more creative with recovering their money by renting the houses out or finding other ways to recoup the losses other than just auctioning them off. I'm new to the Auburn area and there are no houses for rent here and I don't qualify for a mortgage to buy a home. It's very frustrating when I see so many perfectly good homes sitting there empty while my family and I are remain homeless even though we have a good income and are willing to pay $1200-$1400 a month on a rental. Can somebody make sense of this for me?

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Funjunk,
Some homeowners do try to rent out their properties, if they have somewhere to go themselves, but most have payments way higher than rent they could collect and also some of the protections for an owner occupent facing foreclosure would go away if the home were converted to a rental. Currently rentals in Auburn, single family homes are about $1./sq ft, so a typical 1400 sq ft home would rent for about $1400/mo, now if that home was purchased in the height of the market it possibly could have a payment without taxes and insurance of over $1800/mo., taxes and insurance add another $300/mo. The numbers just don't work and banks don't want to be in the landlord business (and you don't want them to either)

We do have a property manager in our office, you may want to connect with her, her name is Audrey Baker, she networks with other agents in the area that have investors with rentals too. 530-888-1928

Also up here, check the community boards at the supermarkets, post office, coffee houses and in the newspaper, drive around the neighborhoods, a lot of landlords just post a sign on the property and leave it at that. You may also want to check Lake of the Pines, there are a lot of rentals in there. Loomis and Penryn too, still rural feel.

On the purchasing side Auburn is an area that qualifies for USDA 100% financing of owner occupied homes, but it your credit or job history is bad that won't work.

Good luck
1 vote Thank Flag Link Fri Apr 1, 2011
"Creative" and "Bank:" are not words I would use in the same sentence...lol! If they were we might not be in such a mess.

Seriously, though, an underwater owner would have to cover their costs and, at least in my market, that is not always feasible. Our rental market has also taken a 'hit'. Renters are also experiencing financial difficulties and are not willing to pay for extras, such as views, a pool, etc. They are looking for basic, clean, comfortable housing that meets their basic needs and that is all.

The other thing the public does not seem to have grasped yet is that the banks are making so much money when they short sell or foreclose, due ot the government bail out program, that they aren't even thinking beyond those windfall profits. They seem to have no thought at all of the devastation they are visiting on the nation as a whole, nor do they seem to care. It's a shame really and congress ought to take action, but then again, congress is about as fast moving and creative as the banks!

Wish I could make sense of it for you, but there is absolutely no sense to it.
1 vote Thank Flag Link Fri Apr 1, 2011
Funjunk, you have raised some very interesting points. Many of the people facing foreclosure, still cant rent the home out and recoup the costs.
0 votes Thank Flag Link Sat Jul 21, 2012
Hello Funjunk, Your questions are valid and I wish you much luck getting your family into a home! Like the other agents and brokers mentioned, most home owners that cannot afford their payments aren't going to rent their home for less than their mortgage payment. This would mean they are now paying their own rent and paying the difference between the mortgage and the rent collected on the home. Also, the consequences for renting a home and then eventually selling it are too much of a risk for most homeowners. Banks are more likely to want them to pay cash toward the short sale, pay the difference in the loan amount, and tax repercussions also exist. So i understand, it's painful to watch these perfectly good homes stay empty, but I also understand why a home owner wouldn't rent.

The other agents made it clear that banks are large corporations with no time or energy to spend renting homes out. They want their money back as quickly as possible to put it toward other investments, etc.

Options for you: Check Craigslist.org first. I've found lots of places to live with that website and new rental listings are happening everyday. Also, as mentioned previously - drive around looking for signs, check community boards, or contact a property manager.

And really, you may qualify to buy. In Auburn there are 100% USDA loans. That means very little out of pocket, and qualification levels are less stringent. Remember, owning means tax deductions galore :)
0 votes Thank Flag Link Sat Apr 2, 2011
i think the answers vary...I have witnessed cases where owners stop paying, rent it, collect rent and don't pay the mortgage. I have also seen people rent out their homes and get enough money plus some "extra" to keep the property or at least get a work out from the bank. Sometimes people are so underwater that the rent is way to low...this happened in south florida for a while whre not only couldn't people sell 400k homes that were now worth $250k, but rents went from $2400/mo to $1200/mo.
In major US cities like where I live, a good rent in a nice building won't come near to covering costs. that said, in the owner occupied areas, they are still strong. the heavy investor concentrated buildings have seen dramatic falloffs in values for just the reasons articulated. once the foreclosures begin, then lenders don't lend, then only cash buyers buy....as a result, prices plummet as the universe of possible buyers is reduced by 80%.
0 votes Thank Flag Link Fri Apr 1, 2011
Every situation is as unique as a snowflake. It's extremely difficult to pinpoint the exact reason why, That's the reason it is so important to ask a trusted advisor before it gets to that point. Trust your instincts and you will be fine.
0 votes Thank Flag Link Fri Apr 1, 2011
Once a home goes into foreclosure the bank owns the property. Banks are not in the home management business. If the owners of these homes had spoke to their banks and arranged with them for a short sale there would not be a forclosure and or auction. You might try calling a real estate agent in your area and see if they have a client that may consider a lease option.
0 votes Thank Flag Link Fri Apr 1, 2011
Unfortunately the rental market for bank REO's is unchartered territory albeit your queston is very well founded. It would serve the banks well to think along these lines but unfortunately they're too big to fail and have hence become just another bureaucratic institution like the post office and Amtrak. Good luck. I wish your and your family well. Wish you were in San Diego. You'd have a roof over your head and on your way to homeownership.
0 votes Thank Flag Link Thu Mar 31, 2011
Hello Funjunk. Welcome to the Auburn area. You have some good questions and there are plausible explanations for what you may have observed. Many home owners have mortgage payments that by far exceed the rental value, which means that they would still be in the red every month. Furthermore, tenants typically don't want to move into a house knowing that foreclosure is a real possibilit. If they were to put up with that, they would want to rent at a discounted amount.

Banks are not in the business of being landlords. There is a rental program though Fannie Mae, but it's not heavily utilized. Banks want to get the properties that they took back in foreclosure off their books as they are liabilities and don't bring in any money. They want to liquidate so that they have more money for new loans.
0 votes Thank Flag Link Thu Mar 31, 2011
Ute Ferdig -…, Real Estate Pro in New Castle, DE
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