So our housing saga is about to come to an end. We have found a beautiful townhouse to rent and will be moving soon.  More on that later.

For those not keeping up, apparently the guy who owns the duplex we rented was heading into foreclosure.  We were unaware of this, and I didn’t realize I needed to research it, so I didn’t know.  We moved into the house the first part of July, and in November were served with papers indicating that the bank had asked for a “demand of sale,” which is legal verbiage in Colorado for “we’re taking the house back since you haven’t made payments in more than a year.”  Here it was, coming up on Christmas, we were finally feeling a bit settled after moving a thousand miles to be here, and we were going to be out of house and home.

Fortunately, law and time were both on our side.  A temporary federal law in place allows tenants to stay for at least 90 days after a foreclosure sale, which means that even if the house sells on March 14th at the foreclosure sale, we are still able to stay here until June 14th.  Throughout most of this, the property manager who is our contact has indicated that “everything is fine,” that a refinance is being completed, etc., and that the “economy” has been the reason for the foreclosure.  Still, after getting in touch with Bank of America, the holder of the loan, I have been led to believe that the owner has not completed requested paperwork for a refinance.

But one thing I’ve discovered is that this whole foreclosure business has made my landlord quite a bit of money.  He has a pattern; he buys a rental property, usually a duplex, and rents it out, paying the mortgage for 18 months or so before ceasing payments.  We’ll use our duplex as an example.  The property was purchased by our landlord in 2008.  He rented it out, for a combined rent of approximately $2400 a month.  The mortgage payment is $1400 a month.  Not bad.

Once he ceases making payments, he continues to take rent, and in fact, as tenants move and are replaced, he takes rental deposits as well.  Over the course of a year or so, he takes in rents of $2400 a month or so, but does not make any mortgage payments.  After about 10 or 12 months of this, the bank begins foreclosure proceedings.  These proceedings are time-consuming; using our duplex as an example again, a request for “demand of sale” was filed with our county court November 4th, 2011.  The sale date was set for March, 2012, four months later.  During those four months, his tenants keep paying, a combined rent of $2400 a month.  So by this time, he’s pocketed almost $40,000 in rent money, but paid nothing in mortgage.

At the last minute, he refinances the loan, putting him back on a payment plan that he can, presumably, afford.  So what happened to that $40,000?

This reminds me of the Step 1, Step 2, Step 3: Profit thing that goes around the Internet.  For this guy, Step 1 is buy the property and rent it out for 18 months and stop making payments.  Step 2 is to pocket continued rental income leading to a foreclosure and restructure.  Step 3:  PROFIT.  Lots of profit.  This guy owns multiple properties, and through diligent searching I’ve found he’s done this with 8 properties in the last three years, all with loans from different banks or lenders.  What’s really scary about this scenario is that this guy can continue to play this shell game, continue to get re-approved for mortgages, while someone like me, who has not been late with a rent payment in 9 years is not a good enough risk for the bank to give me a loan.  That should give a whole lot of people nightmares.

Be all that as it may, we have found housing that meets our needs, with a flexible move-in date.  It is owned by a young guy, whose parents are living in it while they search for a house to buy.  We will move sometime in the next two months. The townhouse has a fireplace, central air conditioning, three bedroom plus a bonus room that we can use as an office/guest room, and comes with all appliances including a washer and dryer.  There is a nice back yard that leads down to a pond; there is a patio and a balcony from the master bedroom, and the home has been well cared for.  We are looking forward to getting into a nice place, with an honest landlord, like we had in St. Louis.  We will be happy to kiss the current place, and the dishonest landlord, goodbye.

This entry was posted on Thursday, March 8th, 2012 at 6:43 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.