Foreclosure Alert System
By Michael Rodrigues of Lemon Landlord
It was like a scene right out of a movie: Our crew was there to fix up a foreclosed home we just bought for an investor. But wait—are people still living in there? Knock, knock. A woman opens the door. Confusion. Anxiety. Fear. A baby is crying in the background. Finally she says, “But I paid my rent last week!”
Whether someone owns a house or is renting it, there are few things worse than having to tell them their home is no longer theirs. The ripple effect of the former homeowner’s foreclosure engulfed the unsuspecting but very upset renter like a tidal wave.
Everyone involved knew of the impending foreclosure except the renter. Renting, like a good PG thriller, has a unique twist. In most financial transactions, once money changes hands, so does the property or service involved. But in case of renting, the party receiving the payment—the landlord—doesn’t usually own the property free and clear, and if he or she does not make the mortgage payment, it puts the renter’s payment in jeopardy.
According to the Distressed Property Institute, 40 percent of all home sales in 2006 were sold as investments or second homes. Many of those now have renters in them, and as the foreclosure crisis expands, it’s the renters who are getting kicked to the curb.
One of my partners, Frank Kelley, asked, “What if we built a Web site that would notify renters of their landlord’s foreclosure?” And so, Lemon Landlord was born. It took six months of research and negotiations to launch the site. Knowing that convenience is the key to any informational business, we held the experiences of our prospective users as our true north. A renter needs to know the foreclosure status of a property before signing a lease. And if a lease is signed, the lessee needs to know if and when a notice of default is filed against it. That was our obvious focus.
What wasn’t obvious was who our users would be. Of course, renters are patrons of our service, but so are property managers, who may be the only contact the renters have with the owners. Property managers have had to deal with the fallout of foreclosures and clean up the mess after unscrupulous owners have taken the money and run.
Mutual transparency is what we’re aiming to develop. If a renter misses his or her payment, everyone knows. If an owner misses a payment, no one knows except the lender. We didn’t feel that was right. Our site has simply evened the playing field of information.
Recently, we’ve been in contact with homeowner groups who want to take a preemptive approach in letting renters know that they are not in foreclosure. Those owner-investors have taken a wise approach in separating their rentals from the masses on the market.
Our third partner, Jeff Kadlec, comes from the banking industry and reminds us that all financial trends are cyclical. This crisis will in time end, but foreclosures will still occur. What we will be left with is the knowledge that someone else’s financial problem could become yours if you don’t arm yourself with an alert system.
The drama in someone’s house should be confined to their TV scene. By giving people peace of mind about their homes, they get to write their own script.