I get tons of calls from prospective tenants wanting to rent one of our company bank owned foreclosure listings. “Can you find out if the bank will rent?” Before I answer that questions lets look at a Bank Owned foreclosure:
In a quick nutshell, a Bank Owned foreclosure (or REO: Real Estate Owned) is a property that a borrower was unable to pay for, the bank foreclosed on the property and the bank now owns the property. Now keep in mind that banks make money when a borrower pays a monthly mortgage that includes interest. Even when the bank no longer holds the note, but services the loan, they earn income from servicing the loan while a borrower pays their mortgage.
Now there are risks to the bank, the greatest being that if the borrower does not pay the mortgage for whatever reason, they lose that income. Now when a borrower originally closed on that loan, they will usually pay for what’s called “mortgage insurance” which will offset some of the losses to the bank in the event of a foreclosure. Another risk is if the house is damaged by a hazardous situation, say, fire, hurricane, etc. Again the borrower pays for “hazard insurance” (A. K.A. to most as Home Owners Insurance) at closing and continues to maintain that policy annually as a requirement by the bank. Most of the risks will be covered by some form of insurance.
Now why, pray tell, am I rambling on about a borrower, and risks to the bank and insurances? I’m sure you just want to find out if you can rent that lovely foreclosure. The answer…. is – No. The bank wants to get rid of that non-performing asset and recoup some or all of their principal dollars they originally loaned. Your renting the property will not allow them to do that. I know your logic says that they will get the equivalent of what they were receiving in a mortgage, but…Casinos would not exist if all the odds were stacked in favor of the player and not the house.
Save yourself the trouble, don’t even bother to call on a foreclosure house when you’re looking for a rental opportunity. The only way you may be able to rent a bank owned home is if you were in the property when it foreclosed and the bank decides to continue to rent it to you while they are still trying to get the home sold!