SFR Investor · Jacksonville, FL · Member since 2012 · 285 posts · 83 votes
I thought I had heard it all, but my father just purchased a short sale home and the owners asked their realtor who asked my father's realtor if they could rent the house for 3 more months after the sale date?
My immediate thought was "Uh, no, they cannot live in the property once the house is short saled", after all, they were just given debt relief on the mortgage, although the bank would get paid, and the title would transfer to my father, who could do whatever he wanted with the property.
Is this legal in Florida, is it legal anywhere? TIA!
Don't worry. If you choose to rent to them the odds are you'll end up evicting them later. They've already proven to have a problem, or they wouldn't be in foreclosure. Not to mention, they know what you paid and can do the math and figure out your PITI payment and will expect you to rent to them for that amount. All of us here know that's not profitable. You're running a business, not a charity.
Jack Bobeck I have no idea of the law in Florida, but I am unaware of any law that limits who the owner of a property can rent to. In Wyoming there is no state law prohibiting it.
I doubt there are any laws that prohibit it specifically. However, the paperwork the buyer signs with the lender(s) that approve the short will prohibit it.
Generally not "illegal". But, there probably was at teast one affidavit all parties signed stating there were no agreements for the seller to rent the house, among other things. Now, if there "were no agreements/understandings" prior to closing, and some type of "emergency or other unforseen problem" arose, the they might be okay. The bank's only remedy would be to unwind the sale, I believe.
Jon Holdman Yeah, that was what I was thinking since they will receive the 1099-I or some alphabet letter form for 2013 with the debt forgiveness and the paperwork you speak of. But hey, once the title changes hands, what would the bank or FNMA really do? I mean, don't they have a few other fish to fry elsewhere?
Jerry W. Agreed, I don't know the law here in Florida, but wanted to get a consensus here at BP. Some VERY sharp people on this board.
Dean Letfus Thanks I figured it did, just could not remember what it was called.
Thanks to all who responded! BP is a great wealth of knowledge!
Dean Letfus We'd like to get them out so we can start the rehab process, but you feel bad to kick people out of their home when they were just forced out. Yeah, we have the right, but Jax is the biggest small town in America, word gets around if you are a douche!
Hey man I feel ya. But their bad situation is not your fault. You are running a business and you have a legal obligation to return a profit to that businesses shareholders........
If you want to be altruistic, offer to find them another property they can rent/lease purchase from you. Help them to start helping themselves :-)
Don't worry. If you choose to rent to them the odds are you'll end up evicting them later. They've already proven to have a problem, or they wouldn't be in foreclosure. Not to mention, they know what you paid and can do the math and figure out your PITI payment and will expect you to rent to them for that amount. All of us here know that's not profitable. You're running a business, not a charity.
Maybe you can legally rent to the old owner, but it's a really bad idea. He still feels he has ownership rights. He may still hold out hopes of buying it back. He will probably 2nd guess every decision.
Cut him loose. Your dad is looking for problems letting the old owner stay.
Jon Holdman Michael B. Dean Letfus I am hearing you guys. I agree, my thought to my father is to let them go and pull this "stuff" on another person, landlord beware, after all the judgement will be on the clerk of courts site for all to see, so not like the short sale can be wiped off the records.
IF my father wanted to offer anything, I suggested he get (going rent in the area for 3/2 is 900) $1,000 per month for the 3 months up front, and then $1,000 for the deposit ( essentially money on the side in case the person has to be evicted) and see if they have the money to do it. After all, they have not been paying their mortgage for years, so surely they have SOME money to use for payments.
I hear you fellas who say, just move on, and I am with you. We want to start rehabbing the house and move on. But at least we give them an option, under our terms, if they can't do it, they move on. It is a business and we will run it like a business.
Jon Holdman Yeah, that was what I was thinking since they will receive the 1099-I or some alphabet letter form for 2013 with the debt forgiveness and the paperwork you speak of. But hey, once the title changes hands, what would the bank or FNMA really do? I mean, don't they have a few other fish to fry elsewhere?
Jack
Do you know that if seller signed any SS disclosures or agreements? The standard one from the instit. lenders that I've seen thus far say there are no benefits to the borrower, no lease agreement, no side agreements, AND that the borrower would not remain in possession of the property. That seems pretty all-inclusive to me. However, I did a short pay recently and the borrower was not required to sign such an agreement. And such agreements would not typically be required by private lenders allowing a short sale.
Jack Bobeck, you must not have read enough horror stories here on BiggerPockets about people who've let the previous owners stay and "rent". Don't do it.
What can I say that hasn't been already said. It's not a good idea to lease to anyone that can't keep up with their current home. If they're having problems keeping up with their mortgage what makes you think they can keep up with rents?
They can be some of your BEST tenants. Just because they did a short sale doesn't mean they're unreliable and not responsible. Highly paid professionals and executives are dumping their homes through the short sale method. Bad things happen to good people. They've probably been banking the monthly payment they weren't making and might have some cash?? How about a month to month lease and dump them if 1 day late :-)
Some lenders (like BOA) make everyone sign an agreement that the property will not be rented back to the previous owners. But from what I can remember, not a lot of other banks include that. I think for some investors it's a valid strategy.