I received a question from Bill today about what happens with foreclosures in the rental programs on the Outer Banks.
Why do the OBX beach houses go to foreclosure if they are in rental programs? Seems like the rental incomes would produce the income for mortgage payments.
Good question Bill. Most rental properties on the Outer Banks are rented weekly during the hot season. Most companies require a 50% deposit at booking and the balance is due 30 days before your vacation starts. The owner receives a portion of the deposit which could be a year in advance of the rental.
The rental companies try to communicate regularly with their owners. If an owner is having trouble paying the mortgage, they might not be willing to share that information with the rental company. The rental agency is promoting the property while the owner is hoping to win the lottery to get them out of a jam. Once the bank forecloses on the property - all bets are off. There are times when the rental companies are the last to know. This can create a real challenge for everyone - the owner is losing their home, the renter has a deposit on a home that can't be rented and the rental company is dealt with trying to find a suitable substitution home at the last minute.
Many of the rental companies are subscribing to a service that lets them know about homes about to enter the foreclosure process. It at least gives the rental agency 30 days notice - which is not much for those who's deposit checks were cashed six months ago.
As for the banks (the ones that are buying the majority of properties back at the courthouse steps), they could care less about renting a property. They want to cut their loss and sell the property ASAP. In most cases, they are already in the hole and my momma always said - when you are in a hole - stop digging.
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