VA loan waiver exceptions

15 Replies

Hello, I recently made an offer on a duplex that I intended to owner-occupy as I would be using a VA loan. I later found out during the middle of the deal that the owner signed a 1 year lease agreement for each of the two units. The question I have is can I still use the VA loan using a waiver saying I will occupy the property within a year. The VA requires occupancy within 60, which is considered to be a reasonable amount of time, but I would be moving in long after this, but within a year. Is this possible under an occupancy waiver?

No, it must be owner occupied. When did that owner lease it, after or before the sale contract. Either way, without disclosure he is in violation of the title rights to be conveyed, breach of contract. You can not encumber title after agreeing to sell, you can't have a leased property and guarantee all rights in title, the right of possession without disclosing what rights are to be conveyed. 

The seller needs to kick someone out, and ASAP! Check reasons to terminate a lease in your state, a sale with the expectation of owner occupancy is generally a reason. I'd have the seller empty a unit before closing! Good luck :)

what was the result with this randall

I apologize for the late response, but I appreciate your input Bill. The owner leased the property right before we started the deal, however I was not informed both units were leased until I was ready to make an offer (this should clarify the scenario). This was not yet under contract, as the contact was subject to the ability of the owner get one of the tenants to move out. During the writing of the contract, I decided to offer an extra $1500 in the total purchase price of the property since the deal was already not in my favor. I figured the higher offer would give the owner the incentive to "buy-out" the lease of one of the tenants, which he told us he was willing to do. The offer of $1500 did not work to get either of the tenants to break their lease. As a last resort I offered to match the owner's offer up to $2500 (stretching my budget). I really did not want to do this because I was already losing money at is was by offering the seller asking price for the property. Unfortunately, the "buy-out" offer of $5000 (my offer and the owner's combined) was not enough to entice either one of the tenants to move out. At this point I had no choice but to move on as owner occupancy in this duplex was not going to be viable. Looking back at the deal, i'm glad they did not accept my offer, mostly due to the fact I would have wasted a lot of my money that could have been invested elsewhere. 

My plan is to continue the search for an owner occupancy multi-family property. If I can't find one in the area, I will continue saving to use a conventional loan to purchase an investment property in a couple years. I would at least like to get one property under my belt before I leave the military, but it may not be realistic at this point.

That is unfortunate.  I have heard of people buying the property and evicting 1 or both occupants because of new ownership and new leases required.  This is like hitting the reset button...not sure if it is legal though...

just so I'm clear on what happened because I'm in this situation right now , I made an accepted offer of 85k both units are leased on the duplex in Oak Park Michigan a Suburb of detroit. My lender tells me according to my state eviction laws, ill can give a tenant a 90 day eviction notice so ill be able to owner occupy. Or if someone has experience with this situation using the VA loan please chime in.

@Tereal Wilsonn  

AS

@Bill Gulley

Referenced above a previous owner is signing away some of his rights to the use of his property by signing a lease with a tenant.

He CANNOT then sell those same rights to another party.  The New owner must honor the lease commitments of the previous owner.

In the example above @Randall George tried unsuccessfully to buy back the rights signed away by the previous owner.

@Richard Dunlop Sir, im having a little bit of trouble understand what your saying, let me try to ask this. Ive heard some members around the form say they can edvict the old tenats because they bought the property, im not sure sure if they had cause to do so?is this fact?

When you buy a property that is rented. The new owner has to honor the lease agreement. If you evict your tenant because you bought the property and want to use it, you expose yourself to all sorts of liabilities. The tenant can turn around and sue for breach of contract and force you to pay relocation expenses that include deposits and moving expenses. I don't think this deal is a good deal for you. You are already stretching your budget and making yourself vulnerable to civil liabilities. My two cents, good luck. Jorge Rullan
Originally posted by @Tereal Wilsonn :

@Richard Dunlop Sir, im having a little bit of trouble understand what your saying, let me try to ask this. Ive heard some members around the form say they can edvict the old tenats because they bought the property, im not sure sure if they had cause to do so?is this fact?

Depends on the lease? Is it expired?, are they in compliance? are they month to month?

You CANNOT do ANYTHING that the previous owner could not do.

The leasehold interest that the tenant has in the property is still valid and MUST be honored by the new owner.

You can possibly schedule a long COE and then extend the deadline if one of the leases is expiring in 6 months or so.

Updated almost 3 years ago

Update to Add: I have seen leases that made a provision to require vacating upon the sale of the property. Most often on a single family house that they were expecting the buyer to be an Owner Occupant.

There was a guy who gave notice to his tenants that they had 60 days to move after he purchased using the VA loan. So not sure how it would've worked out. I'll remind myself to look for the post and ask him to chime in here.
  • Best advice, I can think of; have an attorney look through the existing lease agreements and let them advise you of your options.  
  • And/Or, as some of the above folks have mentioned, it will depend of the type of leases the tennants have and their current status (i.e. are they still within their terms, are they month to month or is there a minimum notice of time required prior to vacating).  
  • You could also place an offer (contract) on the property with the condition that you negotiate a settlement with the tennants for them to vacate, voluntarily. 
  • It all comes down to how much work and money you want to invest in the procurement process of the property.  
  • Good Luck

Yeah you are required to honor the lease. So you can't evict just because you are the new owner. 

I've never heard of a bank knocking on a door to verify who lives there!

Quick update on my situation,i change my closing date to ensure i could move in with the 60day period  and the lease would expire

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