There are several issues in this question. I'll try to touch upon each of the issues:
Short sale in lieu of foreclosure: Find a real estate agent who is versed in these matters. With a short sale, you will get to keep your credit rating intact -- this will not negatively reflect on your credit score. Please get in touch with me NOW so that we can get moving in the right direction with your short sale. The sooner you jump on this, the more willing a bank is likely to work with you (and me) on short selling your property. Otherwise, the bank will foreclose and your credibility will take a bad hit.
Refinance: Perhaps you can refinance your property so that monthly note payments are lower and easier to make. I can help you find a credible mortgage loan officer that will lay out some options for you.
Renter displacement: Please, please, please consider the lives that may be needlessly upset because this bad news reached your renters later than sooner. (Bad news doesn't get better with age.) We landlords have an obligation to uphold our end of the lease agreement just as we expect our tenants to uphold their end. More importantly, if family leasing decisions were made because of the geographical proximity to work and school boundaries, there could be a whole lotta wailing and gnashing of teeth from the soon-to-be displaced family who's hassle factor is about to go up many orders of magnitude.
Legal retribution: Speaking of hassle factor, let's talk about your potential kick in the pants. A young lawyer with nothing yet to lose who wants to make a name for himself, could take up the case for the renter and seek compensatory damages from your holdings because you did not hold up your end of the lease agreement. Get legal advice from an appropriate licensed attorney to lay out your options. If you cannot get a refinance, re-adjustment of terms, or short sale, please consider at a minimum helping the renters find comparable housing in the geographic area of their choice before the foreclosure. Offer to pay their moving expenses and deposits so they're not out any extra money than what they would normally pay you if still under your lease agreement. (If they're behind on their rent, that's a different story -- you should be seeking their eviction.) If you had a property management firm under contract for this property, the tenants may have grounds to sue the property management firm. Guess who then, the property management firm will go after next with an army of lawyers who arenâ€™t so young? (Weâ€™re talking razor sharp fangs here, six ways from Sunday, and white on rice -- it ain't pretty.)
Time lines: Banks vary from firm to firm on the speed at which they operate regarding foreclosures. Normally, it's about six months from the first missed note payment to foreclosure date -- some have taken up to two years. Nevertheless, it is incumbent on you to make good with your bank as much as possible on your note via refinance, re-adjustment of terms, or short sale as soon as you can -- that foreclosure is staring us in the face and it ain't going away. In that vein, the same is to be said similar to what your priest/pastor/imam/rabbi would say: It's just plain common courtesy to make good on your lease contract with your tenants as much as possible. Their lives are affected too.
Please call me if I can help you in any way regarding your situation. You're not alone in this.
MIKE ANTHONY, REALTORÂ®
RE/MAX North San Antonio