Shortly after the peak of the previous real estate crash, a RealtyTrac study estimated that 47% of foreclosed properties were still occupied.
The study also reported the number was as high as 60% in some markets. Although the number of foreclosures eventually dropped, the occupancy rate probably stayed roughly the same.
Why? Because banks aren’t in the business of owning homes.
They are in the business of loaning money. But when they have to foreclose on a house… the bank is forced to own the home until they’re able to sell it to get all or most of their money back.
Lenders have figured out that when a foreclosed house becomes vacant there is a much greater chance that the house will fall into disrepair. Often times the bank would rather have you in the property even after you stop paying your payments and the foreclosure is started because it wards off vandals and keeps the house in livable condition.
There’s been a lot of talk in the media about people living for free after foreclosure – and even many stories about banks “abandoning” properties.
In those stories, people are avoiding house payments for months, even years.
Man, that sounds great! Let’s all live for free. (wink)
Wait… it can’t be that simple, right?
No bank would purposely neglect to collect payments. The only way that you get to live without making any payments is when some major mistakes were made. After the 2008 crash there were so many foreclosures the banks were overwhelmed with trying to manage all those properties. Many slipped through the cracks.
This time around, those mistakes are a lot less likely, for two reasons. First, 2008 wasn’t that long ago. The banks improved their systems for managing foreclosures. Those systems didn’t just go away when the market started to recover. Second, although experts are predicting a drop in real estate prices during 2020-2021, the drop is not expected to be as bad as in 2008.
But you might get lucky! It’s possible, and it’s happened before. However, it’s not exactly legal to avoid payments that you owe, and it can get you in serious trouble.
So why do so many foreclosed homes stay occupied? It’s important to remember that no one wants the house to be vacant. Vacant homes are targets for vandalism and crime.
Residents staying in the property can help the bank maintain the value of their investment, so it’s actually in their best interests to keep it occupied. Partly because of the ways that the foreclosure laws are structured in certain states, banks may ask you to leave for legal reasons while actually wanting you to stay for practical reasons.
There are a few perfectly legal ways to remain in your home, even after foreclosure.
How To Stay In My Home After Foreclosure In Salem
Not all these options are available (depending on your situation and your lenders), and you’ll need some expert advice along the way to help you get through.
1) Wait it out. This is a short term solution, but a valid one. You don’t have to leave your residence until a formal eviction is served by the Sheriff. But when the eviction is finally executed, you’ll have to leave immediately. If your house has been foreclosed on and you’re headed for eviction, you need to be prepared. That’s not to say you should run away and abandon your house when the first notice of default shows up. The proceedings and the process takes months and sometimes years, and it’s not over until it’s over, so don’t give up too early. On the other hand, if you wait until the Sheriff is on your doorstep, you’ve waited too long.
2) Go to court. In some cases, judges are granting stays and delaying evictions. This seems to be increasingly common with concerns about the Corona virus, and the ability of homeowners to make their payments. Even when judges aren’t intentionally delaying evictions, many courts are operating in a limited capacity, and proceedings are getting delayed. However, fighting your eviction in court is really only a valid option if you (and your attorneys) can prove that the bank has neglected a legal requirement during the foreclosure process. During the past few years, a lot of fraudulent behavior at banks has been uncovered – so we may see an increasing trend of using the courts to stop foreclosure. Fighting banks with lawyers is very difficult, expensive and time-consuming, even if you’ve got a perfect case (most people don’t stand a chance). And frankly, if you can afford an attorney to fight your foreclosure, you’re better off spending that money on your house payments.
3) Propose a move-out bonus. Often buyers of occupied foreclosure properties spend thousands of dollars on lawyers and other costs of eviction, so why not save everyone the time and expense by taking some of that money yourself? It’s known as “cash for keys”. It sounds a little greedy, but greasing the wheels does help everything to run smooth. Plus, you can help out the bank and the buyers by not abandoning the house to squatters before they’re ready to take possession.
4) Rent it back. It may sound crazy, but some banks are willing to take on previous homeowners as tenants in their property. That’s only a short-term fix, as they’ll want your agreement to vacate the premises as soon as they find someone to purchase the property. In some cases, we can even purchase the property and rent it back to you.
It’s really good that you’re reading this page and exploring your options. We find creative solutions to help homeowners in Salem, Silverton, and throughout the Willamette Valley.
We can’t help everyone, but we might be able to help you.
We buy local Salem, OR houses like yours from people who need to sell fast.