Renters Affected by Foreclosure Process

Posted on July 1st, 2008 by saman

Homeowners may be the ones who are the main victims of the foreclosure process but renters are not immune from the housing problem. An article in USA today stated that renters are suffering a tough rental market because the number of vacancies is going down, there is not a huge inventory of rentals, monthly rent is going up and the application process is getting stricter.

There are those who are coming into the rental market in different ways. The typical renter has always been someone who is waiting until they can buy a home or those who simply did not want the responsibility of a house. Though these individuals are still the majority of renters there are many who are coming into the rental market that have lost their homes to foreclosure. Others coming into the rental market are those who owned a rental property but lost the property to the bank. These individuals are usually evicted because banks and mortgage companies cannot justify the expense of managing a rental that does not produce a very large income.

Lenders and bank are in a hurry to sell homes so they can recover the most cash in the shortest period of time. Therefore many foreclosure properties that were formerly rental homes are now empty and up for auction.

As banks repossess rental properties and convert them to empty properties this decreases the number of rental homes that are available. This however does not decrease the market for those who want to rent or lease a home. Also when supply decreases and demand increases, prices go up, the application process is more complicated and management companies and landlords become picker when choosing who they want to rent to.

For example, if you have a foreclosure on your credit history, it is more difficult to get a lease and if you do happen to get the lease you will have to pay a large security deposit. The deposit would cover the utilities, the home, and pets. This could end up costing a lot of money for those who already have very little. Right now the rental market is great for landlords but a pain for renters.

There are also some potential home owners that see the chance to get a deal on a great house at a discounted price because of the housing problem However, instead of buying the home right away, the wait for the prices to drop more since prices are on a constant decline. These individuals need a residence somewhere so they are another group of people who want to get a rental. We may see this trend continue in the next couple of years so renters will continue to pay more money and get a lot less.

One hopeful sign for renters is that builders are being contracted to build more apartments. Real estate investors see this new opportunity to make money with rentals so in the next few years there should be more rentals becoming available. Though this may not help those who currently have a rental property it is at least a little encouraging.