Owner Still in Home
Foreclosure properties often come with an interesting yet unusual feature: the foreclosed owner. It is not uncommon for an owner to refuse to leave, even after the property has been legally foreclosed. For whatever reason, the lender has not yet forced its borrower to vacate the property.
Legally speaking, after the property has been foreclosed, the former owner has no legal right to remain in possession of the property. In other words, the borrower has become a squatter.
Depending upon state law, the borrower needs to be evicted. No judge will rule in favor of the foreclosed borrower. The lender will get the eviction order. Following due process rules, there must be service on the former owner. The judge's order to vacate usually gives the borrower some time to get out of the property. Failing to do so could result in arrest for contempt of court. The sheriff and deputies usually must forcibly remove the former owner. It's a messy, heartbreaking situation, especially if the borrower is sick or incapacitated in some form. The lender doesn't like the publicity. Seldom are these orders enforced just weeks before Christmas.
Lenders are at a disadvantage when the property is still occupied. They often can't show the property, and it is often not going to show well because of the current condition. Also squatters aren't known for keeping a property spotless and ready for a quick sale.
You might be able to make a deal faster and easier with a lender when the property is still occupied by the mortgagor. The lender might just want to get rid of the problem, which means the squatter is going to need to be forcibly removed from the property by the county's sheriff.
It is just human nature perhaps, but sometimes the former owner will move quickly and peacefully if the former lender is not the one doing the evicting. You as a real-estate investor are someone different, and they might just move if you ask.
Another way to get the former property owner to move quickly is to offer a payment. Former owners can often be convinced to move if it means some quick cash is paid for them to leave and turn over their keys to you.
Never purchase an occupied foreclosed property unless you plan to start eviction immediately. No matter what the former owner's story is or how sad and compassionate you feel, you must get the former owner out of the property as quickly as possible. If he didn't pay his lender, he isn't going to pay you.
Don't even think about buying the property for former owners and letting them pay you back for the property with some type of repayment plan or a rent-to-own lease. They need to move and start over as renters. Don't give them a chance to fail, with you to follow their path, by keeping them in the property. They could not afford it. No matter what their reasons for failing to pay, if you take possession of the property, get them out.
Make sure you understand the process of eviction in your investment area. Ask your attorney to describe the steps necessary to remove someone from your property. And make sure you are willing to do what is necessary to get a former owner out of the property should you decide to purchase it as an investment.