It may be possible to stop a foreclosure with a modification if you are able to make payments under the plan offered by the bank.
I also recommend speaking with an attorney specializing in this area to provide a more detailed assessment of your situation.
Yes. The home is yours to sell unless the bank has gotten a judgment, auctioned the property and deeded it to the successful buyer. You can use he proceeds to pay off he bank but you will still be responsible for any money you owe after that.
You have a defense in eviction court if things are as bad as you say they are. You need an attorney to help you brung these defenses in court. Ask the organizations you have filed with to help you if you cant afford to hire someone.
You are not personally liable on the note, because you didn't sign it. The debt is not yours. But, if the mortgage isn't paid, the bank has the right to take the property because it was used as security for the loan. If you're keeping the property, you may want to look into refinancing in your own name. This is especially true if your credit is good, since you may get a better loan rate in this market than what your grandmother previously had.
When a property is sold at a foreclosure sale, the new owner "inherits" the current tenants along with their security deposits. By law all tenants must be permitted to live out their current leases. Since you are in a month to month situation, the new owner could legally give you 30 days notice at any time for any reason (the old owner could have done the same). Atty. Goldstein is correct that if you are still living at the property you're not entitled to your security deposit. If the new...
If your property is in Chicago, a liquidated damages clause is illegal under the CRLTO. If the property isnt in Chicago, you may be able to create a lease which provides for a non refundable move in fee, for example. In this particular case, it depends on what your agreement says. If you didn't include any of the above, you'd be safest to give her the money back and move on.
For future rentals, a landlord tenant attorney can help you craft a lease and deposit policy that protects you from "...
Possession does not change hands until after the confirmation of sale. The exception to that would be if the bank had a receiver approved to manage the property. Check with the banks attorney or hire an attorney to review your situation
Generally, a notice to pay rent must be issued, and followed by an eviction lawsuit to regain possession. The issue could become more complicated if the tenant has a written lease and/or he starts paying rent once given notice. I highly recommend having an attorney help you with the process.
It would've been much better if he had spoken to you or tried to negotiate an early termination agreement. However, in Illinois landlords have a duty to mitigate their damages in this situation. This means, regardless of how tenant handled the situation, you must now make a good faith effort to find a new tenant. This doesn't mean you have to take the first tenant that comes along, but you must look and try to find a new tenant to offer a lease to. Tenant is only liable to you for rent...