Under contract on REO property, I found squatters moving in.

Buying & Selling Real Estate

Under contract on REO property, I found squatters moving in.

Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes

Hi. We are in a very difficult situation and hope someone can help.

My husband and I have just started investing in real estate in St Petersburg and this is our first flip project. Currently we are under contract expecting a closing some time this week . Yesterday my husband was driving by the house and found that a woman (with two kids) were moving furniture into the house. Of course, my husband was puzzled and asked what's going on. The woman said that she rented the house from somebody named Juan Garcia (which sounds like a random name) and paid $1,250 to him and claimed that her husband had the lease agreement. But her husband was not there on the property. At first, my husband thought that they were victims of some sort of rental scams.

When my husband informed the listing agent of the situation, the agent went to the house and changed the lock while those people were out of the property (There was no utility service connected as of yesterday). The woman called my husband last night and complained that she was locked out of the house while her personal belongings were in the house. My husband told her that there was nothing he could do, as he was not the owner of the property. We though that it was the seller (the bank and the listing agent)'s responsibility to handle the issue.

Surprisingly, however, the listing agent informed our agent today that he would not deal with the situation, so our agent and we should take care of the squatters. The listing agent's argument is that because the status of occupancy on the contract is "occupied" (the property had had tenants but they apparently moved out about 2 months ago), they are not responsible for the squatter problem. We think it is so ridiculous that the bank and its agent put all this burden on us, even though we do not own the house.

We are considering walking away, but the problem is our earnest money deposit. It seems clear that the bank will refuse to return our money back based on the fact the contract has the "occupied" status. The squatters are not occupying the house now, but their belongings are still in the house. What's the best move for us? Can we get the earnest money deposit back if the bank does not vacate the squatters' belongings?

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Nicole A.Pro Member

Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes

10y

They show no proof of a lease or a payment. No one knows who Juan Garcia is.

Get to know the local rental laws. If this is a good deal other than the people there, consider still closing. Or perhaps renegotiate a little money off for your trouble.

Either way, the very day that you close, go and do whatever the first step is in eviction for your area. Do it no matter what promises the people there give you. If they claim they'll move out, file it anyway!! You can always cancel the eviction if needed.

In addition to filing eviction, you could offer them--in writing--say $300 or whatever to move out by X date. The date needs to be there and you shouldn't give them long. No more than a week, tops. The agreement should also state that they will have all their items removed before any payment is received. Give them payment in the form of a money order or certified check. Not cash. Better to prove you made the payment. If they don't move out by that date, they get no money and you continue on with your eviction.

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Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
10y
Why not explain the situation, let them have their furniture back, and provide them with documentation showing that their "landlord" never owned the property? Then the issue is between them and Juan Garcia.
They are victims here as well (not criminals), so why keep their belongings locked in the house?
Just be careful not to the let them stay in the house at all - if they "establish domicile" then they have rights as tenants and you have to evict them.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Thank you for your advice, Jeff. Initially we thought them as victims too, but they don't show the lease or any record of payment. It is a good advice at we should not allow them to stay in the house. The biggest problem now is the listing agent who does not meet them and let the buyer's agent do all the work.
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Nicole A.Pro Member
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
10y
They show no proof of a lease or a payment. No one knows who Juan Garcia is.

Get to know the local rental laws. If this is a good deal other than the people there, consider still closing. Or perhaps renegotiate a little money off for your trouble.

Either way, the very day that you close, go and do whatever the first step is in eviction for your area. Do it no matter what promises the people there give you. If they claim they'll move out, file it anyway!! You can always cancel the eviction if needed.

In addition to filing eviction, you could offer them--in writing--say $300 or whatever to move out by X date. The date needs to be there and you shouldn't give them long. No more than a week, tops. The agreement should also state that they will have all their items removed before any payment is received. Give them payment in the form of a money order or certified check. Not cash. Better to prove you made the payment. If they don't move out by that date, they get no money and you continue on with your eviction.
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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
10y
Obviously this not legal advice and you may need to get some, but here's my take.
No matter what the "status" of the property is listed as, the physical status has materially changed since when you signed the contract. The listing "condition" doesn't matter as much as the actual condition upon contract acceptance. It is the same as if you were pursuing a REO that was sold "As is" as most are, and before closing additional damage was done. The fact that the property is sold as is, does not free the seller from presenting the property to you on the day of closing in the same condition as when you agreed to the purchase price.
"As is" just means that they won't do repairs so you are agreeing to a price based on the current physical condition. If the roof caves in tomorrow, that is a new condition and opens the contract up to be renegotiated, or cancelled. The price was agreed upon based upon the condition at the time of acceptance, not what the listing states.
So that said, your EM should be returned if you decide to back out. If you had agreed to the purchase with a tenant in place, even still material conditions have changed as that original tenant is not the one that is currently moving in. I'd play hard ball on this one with the listing agent and let them know that. They likely understand very well that material conditions have changed, and maybe you reminding them of that is what they need to hear.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Matt Devincenzo:

Obviously this not legal advice and you may need to get some, but here's my take.
No matter what the "status" of the property is listed as, the physical status has materially changed since when you signed the contract. The listing "condition" doesn't matter as much as the actual condition upon contract acceptance. It is the same as if you were pursuing a REO that was sold "As is" as most are, and before closing additional damage was done. The fact that the property is sold as is, does not free the seller from presenting the property to you on the day of closing in the same condition as when you agreed to the purchase price.
"As is" just means that they won't do repairs so you are agreeing to a price based on the current physical condition. If the roof caves in tomorrow, that is a new condition and opens the contract up to be renegotiated, or cancelled. The price was agreed upon based upon the condition at the time of acceptance, not what the listing states.
So that said, your EM should be returned if you decide to back out. If you had agreed to the purchase with a tenant in place, even still material conditions have changed as that original tenant is not the one that is currently moving in. I'd play hard ball on this one with the listing agent and let them know that. They likely understand very well that material conditions have changed, and maybe you reminding them of that is what they need to hear.
Update: Our agent will meet them at the house and let them move the furniture out. We will see if they appear and agree to move their belongings as they promised. The bank offered $2K if we close by tomorrow. With the squatters' stuff in the house, we are not planning to close.
Mijeong
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Matt Devincenzo
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
10y
Sounds like someone realized the change in status is a real one :-) You may want to consider calling the local police department and asking them about a courtesy escort.
Since you're not evicting and don't have any legal rulings or judgements they won't have any sort of use in actually putting the squatters out, but their presence will likely be enough to prevent anyone trying anything stupid. And yes police departments will drop officers by for situations like this to assist in keeping the peace.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Matt Devincenzo:

Sounds like someone realized the change in status is a real one :-) You may want to consider calling the local police department and asking them about a courtesy escort.
Since you're not evicting and don't have any legal rulings or judgements they won't have any sort of use in actually putting the squatters out, but their presence will likely be enough to prevent anyone trying anything stupid. And yes police departments will drop officers by for situations like this to assist in keeping the peace.
Yes!!! The agent will call the police. i will update later.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Mijeong B.:

Originally posted by @Matt Devincenzo:
Sounds like someone realized the change in status is a real one :-) You may want to consider calling the local police department and asking them about a courtesy escort.
Since you're not evicting and don't have any legal rulings or judgements they won't have any sort of use in actually putting the squatters out, but their presence will likely be enough to prevent anyone trying anything stupid. And yes police departments will drop officers by for situations like this to assist in keeping the peace.
Yes!!! The agent will call the police. i will update later.
Update: The woman did not show up, while all other involved parties were waiting for more than two hours. A neighbor informed us that all furniture moved in was from a local furniture rental company. So my husband informed of the situation to the rental company, who said they would pick up the furniture this Thursday. Later the woman left a text message on my agent's phone that she will pick up the furniture and belongings tomorrow morning. I don't know what will happen, but my husband is scheduling a closing in the tomorrow afternoon. A lot of headache!!!
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
10y
Perhaps the people rented the furniture in order to establish domicile and squat at the property for free rent?
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David Kosiorek
Investor · New York, NY · Member since 2013 · 90 posts · 43 votes
10y
Ahh, reminds me of a recent story that I was just told by one of my funding investors. See he himself tried to go out and secure a property in Brooklyn, paying 600k+ for a would be empty town-home (or atleast at the time he did a walk though without me). Little did he know that NY has the most FN ridiculous tenant laws / squatter laws. He offered them 10k last night and they laughed in his face, saying its going to take years to get me out of this mansion.
Even if you do lose your EMD, its still a cheap LIFE lesson.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Dawn Anastasi:

Perhaps the people rented the furniture in order to establish domicile and squat at the property for free rent?
It looks like that.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @David Kosiorek:

Ahh, reminds me of a recent story that I was just told by one of my funding investors. See he himself tried to go out and secure a property in Brooklyn, paying 600k+ for a would be empty town-home (or atleast at the time he did a walk though without me). Little did he know that NY has the most FN ridiculous tenant laws / squatter laws. He offered them 10k last night and they laughed in his face, saying its going to take years to get me out of this mansion.
Even if you do lose your EMD, its still a cheap LIFE lesson.
How in the world the laws are made in favor of squatters at the expense of property owners! I learned a lot in this process, but I cannot still understand why.
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Jared Irby
Flipper/Rehabber · Mobile, AL · Member since 2015 · 140 posts · 18 votes
10y
Based on a situation I am in right now that is difficult to discuss due to litigation, I would not tender funds at closing until everything is moved out and the house is completely vacant. Right now its not your problem (and you would be able to get your EM back eventually). The second your check hits it is your problem and a much bigger problem than you may think. Get every single item off the property before you close or you could potentially have some real issues. I know first hand....
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Mark Gallagher
Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
10y
@Mijeong B.
You agreed to purchase an occupied property. The property is occupied. I'm certain the contract you signed says the seller has no idea if the property is occupied and if it is occupied it's your responsibility. I don't see how you have any recourse in a court of law. Consult an attorney for more info and stop taking matters into your own hands before you get sued and/or lose a large sum of money.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Jared Irby:

Based on a situation I am in right now that is difficult to discuss due to litigation, I would not tender funds at closing until everything is moved out and the house is completely vacant. Right now its not your problem (and you would be able to get your EM back eventually). The second your check hits it is your problem and a much bigger problem than you may think. Get every single item off the property before you close or you could potentially have some real issues. I know first hand....
Thank you for your advice.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Mark Gallagher:

@Mijeong B.
You agreed to purchase an occupied property. The property is occupied. I'm certain the contract you signed says the seller has no idea if the property is occupied and if it is occupied it's your responsibility. I don't see how you have any recourse in a court of law. Consult an attorney for more info and stop taking matters into your own hands before you get sued and/or lose a large sum of money.
It is very tricky because the listing agent secured the property by changing the lock before those trespassers "settle in" as there is no water or electricity in the house. They have their belongings in the house, but they don't have anything to prove their "residency." They promised to move their belongings but do not show up at the appointed time. What are their rights?
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Dave Shellenberger
Investor · West Grove, PA · Member since 2013 · 74 posts · 25 votes
10y
just curious, does the city/township require a u&o/co for the house to be lived in before settlement?Utilities on ?
I had this happen before, the house I was purchasing was not deemed habitable, and I had a conditional co to fix the repairs-- once I knew there was someone trying to squat(before we started work) I called the township and they had the sheriff kick those scumbags out since the house did not have a u&o and no one was permitted to live in the house until I was finished rehabbing and the house was properly inspected.
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Mark Gallagher
Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
10y
Originally posted by @Mijeong B.:

There are all sorts of different issues here. Are you buying the property via short sale from "Mr. Smith" the former owner, or "Bank XYZ" who has foreclosed on the property? If you are buying from "Mr. Smith" then Mr. Smith could have written these folks a lease that would in fact be valid in most states. If you're buying from Bank XYZ, then they were scammed by someone who wrote them a lease. Either way, you agreed to purchase the property as occupied. If they have a valid written lease, you have to honor it unless it would be proved invalid. Again, you should contact an attorney to help you.
Not legal advice: close on the property and offer the people their $1200 back in exchange for a hold harmless, and everyone just moves on.
Bottom line - CALL AN ATTORNEY!
0 Reply
Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Dave Shellenberger:

just curious, does the city/township require a u&o/co for the house to be lived in before settlement?Utilities on ?
I had this happen before, the house I was purchasing was not deemed habitable, and I had a conditional co to fix the repairs-- once I knew there was someone trying to squat(before we started work) I called the township and they had the sheriff kick those scumbags out since the house did not have a u&o and no one was permitted to live in the house until I was finished rehabbing and the house was properly inspected.
I don't know much about the local u&o/co, but the house we are buying is in a very livable condition, but no utilities was linked,. They wanted to come back as soon as water and electricity were on. Meanwhile, the listing agent changed the lock and posted a big No Trespassing sign on the door.
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Mark Gallagher:

Originally posted by @Mijeong B.:
There are all sorts of different issues here. Are you buying the property via short sale from "Mr. Smith" the former owner, or "Bank XYZ" who has foreclosed on the property? If you are buying from "Mr. Smith" then Mr. Smith could have written these folks a lease that would in fact be valid in most states. If you're buying from Bank XYZ, then they were scammed by someone who wrote them a lease. Either way, you agreed to purchase the property as occupied. If they have a valid written lease, you have to honor it unless it would be proved invalid. Again, you should contact an attorney to help you.
Not legal advice: close on the property and offer the people their $1200 back in exchange for a hold harmless, and everyone just moves on.
Bottom line - CALL AN ATTORNEY!
We are buying from a bank through homesearch.com. I doubt there was any rental scam or any lease, because the woman did not show up to meet our agent once she was told that the police were there. We considered giving some money to resolve the problem but currently we are very angry with her for making our lives miserable. I know this is just business and emotion should not be involved. Still I don't believe they deserve any compensation for their unlawful action.
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Mark Gallagher
Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
10y
Originally posted by @Mijeong B.:

So at this point the property is locked, with no one living there, no utilities on, and simply some rental furniture inside, is that correct?
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Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Mark Gallagher:

Originally posted by @Mijeong B.:
So at this point the property is locked, with no one living there, no utilities on, and simply some rental furniture inside, is that correct?
You are right.
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Mark Gallagher
Flipper/Rehabber · Allentown, PA · Member since 2011 · 1k+ posts · 701 votes
10y
Originally posted by @Mijeong B.:

You are right.
So what has the "tenant" said? And is the furniture company coming to pick up the furniture?
0 Reply
Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Mark Gallagher:

Originally posted by @Mijeong B.:
You are right.
So what has the "tenant" said? And is the furniture company coming to pick up the furniture?
She said that she would haul away her stuff tomorrow morning. The furniture company may come tomorrow morning or this Thursday.
0 Reply
Mijeong B.
OP
Real Estate Investor · Saint Petersburg, FL · Member since 2015 · 14 posts · 0 votes
10y
Originally posted by @Mijeong B.:

Hi. We are in a very difficult situation and hope someone can help.
My husband and I have just started investing in real estate in St Petersburg and this is our first flip project. Currently we are under contract expecting a closing some time this week . Yesterday my husband was driving by the house and found that a woman (with two kids) were moving furniture into the house. Of course, my husband was puzzled and asked what's going on. The woman said that she rented the house from somebody named Juan Garcia (which sounds like a random name) and paid $1,250 to him and claimed that her husband had the lease agreement. But her husband was not there on the property. At first, my husband thought that they were victims of some sort of rental scams.
When my husband informed the listing agent of the situation, the agent went to the house and changed the lock while those people were out of the property (There was no utility service connected as of yesterday). The woman called my husband last night and complained that she was locked out of the house while her personal belongings were in the house. My husband told her that there was nothing he could do, as he was not the owner of the property. We though that it was the seller (the bank and the listing agent)'s responsibility to handle the issue.
Surprisingly, however, the listing agent informed our agent today that he would not deal with the situation, so our agent and we should take care of the squatters. The listing agent's argument is that because the status of occupancy on the contract is "occupied" (the property had had tenants but they apparently moved out about 2 months ago), they are not responsible for the squatter problem. We think it is so ridiculous that the bank and its agent put all this burden on us, even though we do not own the house.
We are considering walking away, but the problem is our earnest money deposit. It seems clear that the bank will refuse to return our money back based on the fact the contract has the "occupied" status. The squatters are not occupying the house now, but their belongings are still in the house. What's the best move for us? Can we get the earnest money deposit back if the bank does not vacate the squatters' belongings?
Update) It all turned out fine. The woman moved her stuff out and the furniture rental company hauled away the furniture. We closed with the early close incentive. Very stressful three days, but at least we got $2000 for the trouble.
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