Hi All, Can someone please explain to me what kick-out clauses are, and as a potential renter, how concerned I should be able it? I’m looking into housing for business school and one of the places I’m considering has a “30-day kick-out clause.” The apartment is very nice, and is priced at about $600/month less than other places I’m considering. The reason it’s so cheap is because the unit is in foreclosure, and the 30-day kick-out clause means that if the unit ends up being sold (instead of rented out), I’d have 30 days to move out. I don’t believe a bank is currently in possession, but once it is, I gather it means that they could ask me to leave the apartment within 30 days after taking possession of the apartment. My question to anyone familiar with kick-out clauses is, how likely will it be that I’ll get kicked out of the bank takes over? Will banks ever let you stay for the duration of your rental, or does it really depend on the situation? The $600/month I’d be saving is incredibly appealing, but I’m also worried about getting booted out and having to worry about finding another apartment once school has started. I don’t know anything about this stuff, so would really appreciate your advice. Thanks!
which city?
This actually happened to me once while in grad school; bombed a midterm because of it. So this was a condo unit where the borrower defaulted or is the whole building under a single ownership and in default? The bank will almost surely sell the unit for whatever they can get and give you the boot. They want it off their books; definitely not interested in being your landlord, imo.
Wow, that really sucks jbaldyga – personally I hate moving and it sounds like there really isn’t any reason why the bank wouldn’t want to repossess the apartment aside from being “nice.” The unit itself is one where the borrower defaulted; I don’t believe the whole building is under single ownership. Chances are there is too much risk with this apartment…more than what I’d be willing to put up with anyway…
Banks do not want to own real estate, so they will sell as soon as possible. If the buyer is looking for an investment property, they might be interested in keeping you on as a renter and might even keep the below market rate if you sign long-term, but you never know.
$600 bux a month in savings is worth it depending on your circumstances… 1. do you have a giant star wars collection you will be taking along with you?.. meaning if you are planning on relocating all of your propery and have a lot of it it might be a heavy burden/expense to bear if you have to move in short notice. If you pack light no biggie. 2. Do you have a friend/relative in the area that cool enough to let you transition at their place in case you do get the boot? If so- and you are the light packer- then you know you won’t be caught searching desperately, possibly ending up stuck in a place that nullifies what you saved before. 3. How mkt’ble is the place? Whats it listed for? If its a good enough deal relative to the comps it may be gone soon. 4. How much of a pain are the other factors in selling? ie will they require you to allow agents to show the property while you are living there… (you don’t want some creepy foreclosure shopper thieving your leila metal bikini while you are in acct’g class!!!) ?
If it is a single unit, it is very unlikely the bank will have interest in you staying on. They sometimes allow this in single family homes because they want someone keeping up the place, but even that is short term until it is sold by the bank. In a condo there is less concern about upkeep. Even if the bank let’s you stay and pay them rent (it happens, occasionally) the new buyer likely won’t. They are even buying it to live in, or to rent, in which case they’ll want you out so they can get a market return on there investment. In other words, you have a lot of risk of getting kicked out, and you’re being offered $600 a month to accept that risk. Only you can decide if that is a good deal in your circumstances.
Thanks for the feedback, guys. All factors considered, I decided to pass on the apartment. I even spoke with another realtor who happened to know of that same apartment, and provided these candid insights: "It is a foreclosed unit. The management company is trying to recoup the association fee the owner has not paid as soon as the unit is sold you have 30 days to move out. So in essence you are getting a month to month lease. I would hate to be studying for finals and have to worry about finding a place to live and moving at the same time but it is up to you. " Next!!