According to a report released by the National Association of Independent Landlords 82% of the 582 landlords polled would rent to someone who lost a home to foreclosure, assuming that the applicant previously had a good credit history.
Landlords won’t typically rent to applicants with poor credit – and a foreclosure can have a devastating affect on a credit score. The exception appears to be when someone has paid their bills their whole life but either lost a job or could no longer meet their mortgage and had the hand their keys back to the bank according to Tracy Benson, president of The National Association of Independent Landlords.
The poll was conducted between March 21 and March 25, 2011.
Would you rent to someone with a previous foreclosure?
Ahh, it’s the typical catch-22. The rental market is hot right now but it’s hot from all the people losing homes to foreclosure. Landlords that automatically disqualify renters due to credit are missing the big boat. I’m actually finding more landlords that are overlooking credit issues as long as the renters are able to provide credible proof of income and sometimes a little extra security deposit. Co-signers can also be a great tool to turn a “no” into a “yes” – a lot of times it’s about making the landlord comfortable with the risk and getting someone else with good credit on the lease can sometimes tip the scales.
Landlords usually check credit reports, but most say they’ll still rent to people who have scores dinged by a foreclosure. Thanks for sharing.
I’ve heard about this issue.Increasingly, mortgage defaults stem more from lost jobs rather than borrowers who had a toxic mortgage they could not afford. A thorough background check usually indicates whether financial woes are part of a recent spate of bad luck or a life-long trend.
It really is a tricky one. You can understand a landlords nervousness but at the same time often the potential tenant hasn’t done much wrong. As the above comments state; I think it should be a case of putting each applicant through the same stringent background/credit checks that have always been run and using common sense.
I do if certain criteria are met. I don’t usually rent but I do offer lease to own agreements and I can be very flexible as long as the tenant buyers can provide good references, rental references (preferably not the current reference!), and I run a credit check to see accounts in good standing. Income qualification and has something to put down towards the purchase price are also important so they are vested in the property.
I find buyers first and talk to them a few times and as we start to build a relationship I can see if this buyer would be a good fit for my agreement. So far I have done well. (knock on wood)
I would apply the same principal to a rental, minus the option payment. I’d require a deposit of course and maybe a minor repair or two in exchange as a good faith gesture. 🙂
Hi again Dionne,
It sounds like you do a good job with your due diligence and prescreening. I certainly applaud your efforts and process. One small caution with the minor repairs, be sure you aren’t setting up a liability situation. Maybe you can have your attorney check your lease to protect you forom a tenant injury claim. I also strongly encourage tenants and lease option buyers to purchase a renter’s liability policy and name my entity as an additional insured.
Other than that, you’re off to the races…
To your success…
Augie
Accepting someone for rent who has had a previous foreclosure can feel quite risky but the cause of the previous foreclosure should be more important then the foreclosure itself. Cases of foreclosure such as loosing a job in past should not be taken negatively for letting the client rent the property now.