Educated info on foreclosure?

Question

My son's landlord repeatedly lied to him and the other tenants about their duplex going into foreclosure. Notices for the landlord were being mailed to their address, landlord claims he lives there and doesnt, and a friend of theirs that is a realtor told them it was up for foreclosure in Sept. When my son asked the landlord, he claimed it was all a mistake and he was taking care of it and not to worry. Today a realtor for the bank told them that it would be foreclosed on Sept 15 and not to pay the landlord for Sept. They are on a month to month lease, so I know the bank has to give them written 30 day notice. The realtor also told them that they could sue the landlord for 3 months rent as he mislead them AND that the realtor was going to make sure the bank gave the tenants a $500.00 buy out. Is this $500 per person? There are 5 people in the lower and 3 people in the upper and none are related. This is a 2 bedroom upper and 4 bedroom lower. All are friends. And does the buy out mean they waive their right to a written 30 day notice? My sons part (lower) is in perfect condition, but how do you get a deposit back from the landlord or do we get it back from the bank? I am a landlord of 14 yrs but have no education on foreclosure. Please help. Are there any websites to help tenants with forclosure laws for the state of Michigan?

Answer 1

I would think it highly unlikely that the tenants will see one cent of their security deposit.  If the owner is losing the property, that deposit has probably been gobbled up. You could chase the landlord, but you can't get blood out of a stone.  

The bank is not responsible for returning the deposit.  Good luck with the realtor extracting $500 per tenant from the bank. IMO, that will not happen. Many states now allow 30 days for a tenant to vacate in case of foreclosure.  Some banks will allow tenants to remain in the property so long as they pay rent, and so long as the tenant agrees to vacate willingly on 30 day notice.  Thats good for the tenant and very good for the bank which does not  worry as much about securing the property and breakins ransacking the empty house, and providing heat in the coming winter.

As for suing the landlord, he is probably broke.  The realtor may be blowing hot air.