Hello All,
It’s been awhile since I had a seller rent back. I’m in Maryland and my offer was accepted on a short sale. The owner wants to rent back for 2 months. All of this will be in the ratified contract.
My question is: what happens if after the 2 months she wants to continue renting but her credit is not good, (and I don’t usually rent to people who don’t pay their bills, with a few exceptions), would I have to evict her through the courts?
dlmcgill
This would be illegal. And would violate the arms-length requirement. A current owner cannot profit from the short sale, this often includes rent-backs.
Are they’re any exceptions? My realtor tends to believe that this is alright and I want to have all of my facts. I don’t like to have the seller rent back anyway. Thanks.
dlmcgill
I doubt it. But you might check with a real estate attorney.
If your real estate agent can’t explain to you that the rules of short sales, than they are not versed in short sales. Find another realtor! Trust me! Buy short sales without someone who has gone through them before and are a subject matter expert can mean what it did for us: 12months, and additional out of pocket cost for repairs.
I agree with Ashon.
I often wonder why investors who buy foreclosures and short sales think that people who COULD/WOULD not pay their debts are going to suddenly change and become model tenants.
NO…get them out at the close!
Great advice! Thanks guys.
dlmcgill
Every short sale, regardless of lender, requires the “arms-length transaction” certification that has wording like below:
“The Buyers and Sellers nor their Agents have any agreements written or implied that will allow the Seller to remain in the property as renters or regain ownership of said property at any time after the execution of this short sale transaction. None of the parties shall receive any proceeds from this transaction except the sales commission.”
If you ignore this part of your purchase agreement, you open yourself up to some serious repercussions and that is not even considering the ones caused by a financially unstable owner/tenant.
Like my wife told me. This lady just stared a giant like Chase, what do you think she is going to do to little ole you? She will pay you like she wants to not like you need her to.
Thanks guys. I backed out of that deal. It was a sweet deal if not for the owner :smile
Question: Is there a time frame to re-list a short sale if the bank did not approve the original price and the home owner took it off the market?
dlmcgill
There is no time frame for re-listing.
During the time between the Notice of Default/Notice of Sale and the auction, the home owner can choose to list the property with a real estate agent but they are not forced to sell the property. Of course, if they are sure that they cannot get caught up, I do not know why anyone would voluntarily want a foreclosure on their record.
Your next option is to purchase the property at auction. Just make sure that you have done all your homework because any liens after this loan will remain current. Plus you have to have money to cover the full price within 24 hours of the sale.
I don’t think that this person is in default. They were just attempting to sale the property because they just had another house built out of state. And they had to try to short sale because the property isn’t worth what is owed.
dlmcgill
Okay that makes sense. Check your short sale agreement and look for the Arms-Length Transaction clause. If your contract states something to the effect of “The Buyers and Sellers nor their Agents have any agreements written or implied that will allow the Seller to remain in the property as renters or regain ownership of said property at any time after the execution of this short sale transaction. None of the parties shall receive any proceeds from this transaction except the sales commission.” then there is no way around it. She cannot rent the property from you. But, you could give her a 60 day eviction notice but I am not sure if you could accept rent during the “eviction” process. You would have to check with a real estate attorney on that one.
Many of my tenants either walked away from their homes via foreclosure or short sale and all have been great tenants, some for 3 plus years. Their proof of income showed all could easily have afforded their mortgages, just they chose to walk away for financial reasons. I am in Vegas where values dropped tremendously so it’s in style plus here if they don’t pay I’ll have them out within about 15 days.
Just ran into this on a short sale where the seller planned to lease the home. Great since zero vacancy and seller had been taking great care of the home. The day before closing the bank slid a Fannie Mae short sale affidavit which at least allows seller to stay up to 3 months for relocation. The seller got this put across his desk the day after closing. They said if not signed the transaction could be rolled back. Sort of bull they pulled it at 11th hour of deal but whatever.
Short sales never work. I guess there is a unicorn out there somewhere but not nearly enough to grow a business off of.
Many sellers are requesting to retain possession and/or rent back after close of escrow. Typically up to 30 days. I have seen some who need up to 90 days.