Thursday, Aug. 28, 2008 | midnight
Sean and Katherine Kahlenberg were stunned when a "for sale" sign appeared one day in the front yard of the house they were renting in Silverado.
They called the real estate agent on the sign and learned the owner was in default. Even the rental company the owner hired to manage the property was surprised by the news.
The for sale sign appeared in May and the couple has received certified mail from lenders for the owner, but don't know how to reach him. The real estate agent they talked with said the owner was attempting to sell the house to the bank at a substantial discount on the loan, known as a short sale.
The house the Kahlenbergs live in with their two children, ages 4 and 1, has not been foreclosed on, as far as they know. Only a notice of default has been filed that gives the owner up to 35 days to make the mortgage payments and stave off foreclosure.
All summer long, the family has been in limbo wondering if an eviction notice will show up on the door forcing them to pack up and move quickly.
The couple is still paying their rent. But they are forced to ask why they should when the owner isn't using it to pay the mortgage?
"We're getting no information from the owner or the rental company," Katherine said. "This is our life we're dealing with and they don't have any sympathy for that."
Thousands of unsuspecting tenants who have been paying their rent on time are getting entangled in the foreclosure crisis that has plagued the housing market for more than a year.
In many cases, their landlords bought properties during the boom, rented them out, then failed to keep up with the mortgages.
The actual number of affected renters is not known, but half of Nevada's 18,220 home foreclosures from October 2007 to January had mailing addresses different from those of the foreclosed properties, which could imply that they were rentals, according to RealtyTrac.com, a tracker of foreclosed properties.
One in every 43 Nevada households received a foreclosure filing during the second quarter of 2008, the highest foreclosure rate among the states and nearly four times the national average, according to RealtyTrac. Las Vegas tallied the third highest metro foreclosure rate, with one in every 35 households receiving a foreclosure filing during the second quarter.
When the forecloses process begins, the lender sends the notice to the owner. It could be several months before the lender takes possession. As soon as that happens, the courts order local constables to place a three-day notice to vacate on the foreclosed residence. In cases of absentee owners, that could be the moment the tenants first learn about the default.
If the property isn't vacated within three working court days, the tenants could be liable for court and attorney fees, Las Vegas Township Constable Bobby Gronauer said.
Nevada legislators plan to draft bills in 2009 that would inform renters of default notices and allow tenants to break leases on homes with a notice of sale issued, and require 60 days' notice before a long-term tenant is evicted from a foreclosure property.
The drop in home prices has allowed the Kahlenbergs to be able to afford their own home and avoid going through similar problems with renting again. They hope to close the deal before the eviction notice comes and move out on their own terms.
The Kahlenbergs knew the housing situation in the valley was gloomy because when they signed their one-year lease in October, their friends, Lorraine Garcia and her finance Robert Chachere, had been evicted from the townhouse they were renting when it went into foreclosure at that time.
Garcia said she had no idea the owner was behind in payments until a locksmith showed up to change the locks. At the time, they were six months into their one-year lease on a townhouse they rented in the southwest corner of the valley.
The couple didn't know who to turn to for advice.
"I really didn't know who to believe," Garcia said. "There was no entity to call to offer support."
Garcia and Chachere moved in with the Kahlenbergs for three months.
They bought their own home in January and found peace of mind for the first time in nearly a year.
"It's just been great because it's ours," Garcia said. "Just driving up around the corner and into the driveway is the best feeling in the world because nobody can kick us out unless, of course, we don't pay."
Jeff Pope is a reporter for the Home News. He can be reached at 990-2677 or [email protected].