Foreclosure Numbers Are Driving Up Rents
The foreclosure crisis is still raging, according to statistics from Realty Trak, an online foreclosure marketplace.
They reported nearly 235,000 proceedings for March. That’s an increase of 5% from February, and 57% from March, 2007. This trend is creating an influx of renters, most of whom lost their homes, but many who were evicted when the landlord faced foreclosure.
A Landlord’s Market
Vacancy rates are low. According to the National Association of Realtors, the average vacancy rate is 4.7%. Five percent is considered a “landlord’s market”. Parts of New Jersey, San Jose, Miami, Salt Lake City, and San Diego have vacancy rates of 2.9% or below. That drives up rents – a predicted 5.3% increase this year, compared to last year’s 3.1%. Current loan restrictions make it harder to buy a new home, making renting the only option for many.
Property managers are watching these trends play out. Mike Frazier, with Carousel Realty of Dyer County,Tennessee sees it every day. It seems the rental demand increased three fold in two months, he reports.
Does Bad Credit Bar Applicants?
Does this high demand for rental properties put the foreclosed homeowner in a squeeze as they try to rent with bad credit? How are landlords looking at tenant screening now that foreclosure has become so common?
Antelope Valley Property Managements Jonathan Mitchell with Classic Property Management of Santa Clarita, California gives careful consideration to applicants. We tend to look at foreclosures a little bit differently, he explains. For example, we rate them higher than someone who just got 50 credit cards and blew through them without paying. As long as the foreclosure is the only thing wrong with the credit, we can usually swing a deal.
Mike Frazier agrees.”If I have an applicant with a good job and good job history, I will usually rent to them although they have a bankrupcty or foreclosure.”
Screening the Landlord
Property Manager Josette Newton with BridgeWell Realty in Conyers, Georgia, is experiencing a different trend. “My screening and background checks are for informational purposes mostly for the landlord to make an informed decision. Its not credit score driven. Most importantly, we look for evictions and judgments and finally the debt ratio to make sure they can afford their monthly obligations. Bankruptcies should be one year seasoned as the individual is starting with a clean slate however and additional security deposit may be required.”
“The foreclosures havent affected my tenant screening process as much as me screening and choosing the landlords now a days. As you know the properties are not the landlords primary residence so its not as much as a priority. Some landlords are going through financial hardship in which, when they receive the rent its used for other purposes with the expectation of paying the mortgage for the rental property at a later date.
“To put it in a nutshell,” she continues, “based on the foreclosure activity that we are seeing, I look at the landlords a little harder than the prospective tenants. Even with sales, most sellers dont share the financial hardship that they are experiencing. I ask as plain as day, ˜Is the sale of your house time sensitive? Should it not sell within the time that you expect, how will that affect you…?”
What do you think? Please share your insights with other property owners by leaving your comment below.
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