I listed my home for sale at reduced price in hopes of EMC mortgage co. accepting the reduced price. Now the interested buyer wants to know if- once they put the contract down- we would rent to them until the short sale is hopefully approved. Good/ bad idea?? I just don't want to be stuck with renters if short sale is denied...
Any advice is appreciated.
Here is what you can do, but you need to understand the ramifications. You can move them in the home with a Month to Month agreement. I would collect enough from them just in case you need to evict and I would also collect market rent.
Now there is the part about collecting rent without making mortgage payments. That is another story.
But if it was me I wouldn't do it. Just more headaches.
thank you for the responses. My concerns are what you stated, what happens if the sale is not approved and I need them out? they trash the house !?
On the hand, it would help me with mortgage payments for a few more months while waiting to close...
I have gone back and forth on this issue with short sales that I negotiate here in Portland. Ultimately, a renter in a house that is being foreclosed on is a recipe for disaster.
You can disclose all you want to the tenants...but think about it...you don't want the type of tenant who doesn't care that the house is in foreclosure and could possibly go back to the bank while they are living there.
I should clarify, I am making mortgage payments and the couple wanting to rent the house are the ones willing to put down a contract. We just don't know if the bank will approve short sale offer or not. They want to get into the house as soon as possible without having to move two times (which I can understand).
I was thinking that I could write a clause into a month-month lease stating that if the bank does not approve my short sale they would have 30 days notice to vacate....
I just worry it's too many "what ifs". But if I don't get another contract soon I will be probable foreclosure as I will soon drop behind on payments. So much to think about!
If you rent to the buyers, then know they have an actual loan approval for the amount offered, and can go up. Is their offer close to fair market value?
Also, how long will it actually take for the bank to foreclose once you stop making payments. If it's 4-6 months, rent it to the buyers, unless their are other prospects. You still have liability issues and headaches to deal with, but you have money coming in to help you keep paying the loan. If the buyers/renter are on board, and they totally check out, and they have a loan COMMITMENT for the purchase, and it's fair market offer, and you have a lender that is reasonable, it could be a good solution.
Other ifs you want to cover too. And get a nonrefundable binder deposit, not security deposit.
Weigh it out these buyers or ???? What are your potential options? What are their terms in the contract to buy?
It's risky, but a bird in the hand....
Besides, if they move in, contract to buy, show they are fully capable to buy, put their money where their mouth is, no other reasonable contract options, then you risk them trashing a house the bank will foreclose on.
On the other side, you are still making payments, so you might have a year before the bank forecloses (not sure how long the norm is in VA) to get another offer and hope the buyer closes.
UPDATE: thanks for all the input everyone. I decided NOT to rent the house out and the buyers still made an offer!! Now just get the bank to approve the short sale . please keep fingers crossed! Thanks again