Home Buying in Elgin>Question Details

Stacey Maram…, Home Buyer in Mundelein, IL

Can you rent back to a short-sale homeowner after closing?

Asked by Stacey Maramba, Mundelein, IL Sat Oct 6, 2012

Hypothetical question, as we're thinking ahead: Would anything preclude us from renting back to the homeowners of a short-sale property after we close on it? We'll likely have a gap of time between when we close and want to be in the property. Also, would property damage from this type of tenant be a valid concern?

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The current U.S. housing market and national financial crisis has caused that lenders are much precocious about giving mortgage loans than they used to be. Buyer's lender may charge you a higher interest rate which is normal in a investment property compare with owner's occuppied residences. And, if this is not enough, buyer can have so many liability issues. They will have to incur in extra expenses like hiring a lawyer to prepare the lease and get rental insurance to cover any property damages.
Is too much risk and expenses to do so. The best solution in my opinion will be pospone the closing until the sellers are ready to move out and keep on with their life in another property.

Best of Luck,

Maria Cipollone

http://www.Flahomespecialist.com
2 votes Thank Flag Link Sat Oct 6, 2012
Short term rent back on short sales are quite common. Since the sellers have no control over when the short sale approval comes through, lenders often allow for a 60-90 day rent back to allow the sellers to make arrangements to move out in an orderly fashion. Most of the large national lenders like Wells Fargo and BofA will have a short rent back restriction on their approvals. If it's with a smaller bank, then it's quite possible that they haven't put any restrictions on rent backs.

The tough part is that you really don't know for sure until the seller's listing agent gets back the final short sale approval documents. You can have your Realtor check with the listing agent to see if he/she has an idea of the lender's policy.

As for your concern about property damage, it's quite valid. You do expose yourself to potential damage with a short sale rent back. The best solution is to treat the rent back just like any other lease. Have a walk-through with the seller and hold a security deposit. Postponing the close, while it's a good idea and works for regular sales, doesn't work on short sales. The short sale approval documents often have strict closing deadlines that must be met in order for the short sale to complete.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Sun Oct 7, 2012
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