Multi-family unit foreclosures on rise in Tri-Cities

By Ingrid Stegemoeller, Herald staff writer

The foreclosure crisis has had a devastating effect on families across the country who have lost their homes, but Shannon Lang is facing another side of the problem.

She's a longtime renter in a Kennewick fourplex who is moving out because the building is being foreclosed on.

The 50-year-old woman lives on a fixed income because of multiple sclerosis and receives housing subsidies.

Lang said she's paid her rent every month and can't afford the costs of making deposits on a new apartment. Outstanding medical bills mean potential landlords are skeptical of her credit.

"I have nowhere to go," said Lang as she looked at the stack of boxes in her living room.

Lang had "no clue" the fourplex owner had any financial problems until a few weeks ago when she came home to a change of ownership notice being posted on her door.

The landlord, who lived below her, recently had moved out and apparently had fallen behind on mortgage payments.

"I would've stayed here for another eight years," Lang said.

While foreclosures on multi-family buildings such as duplexes and four-plexes aren't common in the Tri-Cities, they appear to be rising, as they are for single family homes.

Linda Dukelow of the Benton-Franklin Rental Owners Association said tenants who are living in a building being foreclosed on should "think hard about bailing out just because the ownership changes."

If tenants have paid their rent on time, a new owner might want them to stay on, she said.

"If this should happen to you ... the new owner does not want four empty units," Dukelow said.

Lang said she's already experienced trouble with the water bill at her complex and is unable to handle the uncertainty of what will happen with the building.

Occupancy rates also are high in the Tri-Cities, at 97 percent in all three cities, according to an informal survey conducted in September by Crown Property Management.

As for larger apartment complexes, Dukelow said a similar concept applies. New owners can't live in 30 or 40 units or more, so if a complex changes hands in a foreclosure sale, tenants likely would experience an ownership change and any new rules or rent rate changes that come with it, she said.

Every situation is different, said Eric Butterworth, a Kennewick attorney who practices real estate law. He advises tenants and landlords facing foreclosure to seek legal help to make sure they understand their rights.

The Tri-City area hasn't experienced the foreclosure crisis as other areas of the country have, officials said.

"I don't think it will be out of control like other markets," said Gayle Stack, broker and owner of EverStar Realty in Kennewick. "But we'll see some foreclosures in the next year."

In October, the most recent information available, there were 75 notices of trustee sales recorded in Benton and Franklin counties, according to a report from the Benton-Franklin Title Company. That's 10 more than the 65 recorded in October 2007.

Nationally, nearly 3 percent of all home loans were in the process of foreclosure at the end of the third quarter, according to the Washington D.C.-based Mortgage Bankers Association. In Washington, that number stood at 1.2 percent.

Those numbers include loans for one- to four-unit residential properties.

There also have been multiple foreclosures at The Villages at Chapel Hill in Pasco, where there are more than four dozen fourplexes, Stack said.

Notices of trustee sales filed with the county auditor's office show a handful of the properties entering the foreclosure process in the past year.

The notices mean homeowners or landlords have 90 days to get their payments current or to sell their homes before foreclosure.

The difference with multi-family units is tenants may have been paying their rent on time, but if landlords aren't making mortgage payments, those tenants may have to move out.

The notice of trustee sale for the building where Lang lives is dated Nov. 5 and shows that the owner, Dorinda Woods, owes more than $10,000 in monthly payments, late fees and other expenses. The owner, whose whereabouts Lang said she doesn't know, could not be found to ask about the foreclosure.

In most cases tenant rights are subject to the bank's deed of trust, Butterworth said.

When the bank starts the foreclosure process, it will send a notice to the owner and those living in the property, Butterworth said, as well as posting notices at the property.

That's how some tenants, like Lang, find out that the building they're living in is in foreclosure, Butterworth said.

If the property goes up for auction, whoever buys it -- either the bank or a third party -- is entitled to possession within 20 days, which may mean evictions if the buyer wants an empty property.

Butterworth also does tenant evictions and said he hasn't seen much of an increase in that area.

"The vast majority of landlords are keeping their promise" and paying the mortgage, he said.

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Saturday, Dec. 06, 2008

Multi-family unit foreclosures on rise in Tri-Cities

By Ingrid Stegemoeller, Herald staff writer