If you're no longer able to afford your home, you don't have to sit idly by and watch while your home falls into foreclosure. If you can find reasonably-priced housing, you have the option to rent out your home and let your renters pay the mortgage – unless your homeowners association says otherwise.
If you live in an area with a homeowners association – often referred to as an “HOA,” you're already familiar with the degree of power these organizations wield. Although some HOAs are lenient and either do not possess or enforce rigid bylaws, others strictly control what members can and cannot do. Your HOA may control everything from what color you paint your house to the type of flowers you grow in your garden. If you aren't sure what your HOA bylaws have to say about renting, get a copy of the bylaws and read the regulations carefully before you start searching for a tenant.
The general belief that homeowners take better care of their properties than renters leads many HOAs to prohibit owners from renting out their homes or only allow a limited number of rentals at any given time. A large number of renters in a given area also reduces the amount of buyer demand. According to MSN Money, a study conducted in California found that home values dropped in areas where renters occupied 30 percent or more of the homes. Part of an HOA's responsibility includes keeping home values stable. Unfortunately for homeowners who see renting their home as a way to avoid foreclosure, the risk to property values often means placing rental restrictions on the community.
Amending the Bylaws
What many individuals struggling with their HOAs don't realize is that homeowners often have the power to change the bylaws. All HOA regulations regarding amendments differ, but in many cases, members can propose new amendments to the board, provided they have enough community support. If your HOA allows members to propose changes to the bylaws, it may be time to rally support from your neighbors and fight for your ability to rent out your home. As a rule, foreclosure damages property values more than renters. If the foreclosure rate in your region is high, this may provide the community with enough incentive to push for change.
If your HOA doesn't allow renters and your efforts to amend the bylaws prove unsuccessful, it's time to consider foreclosure alternatives other than renting. If you have equity in your home, selling the property is always an option. If you owe more than your home is worth, you may still be able to sell the property via a short sale. If you want to keep your home, consider applying for a loan modification from your lender. A loan modification alters the terms of your existing home loan with the goal of making your payments more affordable.
Ciele Edwards holds a Bachelor of Arts in English and has been a consumer advocate and credit specialist for more than 10 years. She currently works in the real-estate industry as a consumer credit and debt specialist. Edwards has experience working with collections, liens, judgments, bankruptcies, loans and credit law.