Home Buying in Ravenswood>Question Details

kawaiinose, Home Buyer in Chicago, IL

Short sales and pre-closing possession fun!

Asked by kawaiinose, Chicago, IL Thu Aug 23, 2012

Long story short- put an offer in on a short sale- bank came back $20k more. Decided to walk away originally- 2 days later our landlord told us they would be increasing our rent. We looked for another apartment and realized that rents have gone up a crazy amount in the last 4 years.... Decided that we could go up $15k more on the condo- the seller's came up with the extra $5k for the bank.
Just found out yesterday that the bank has closed the file so we're basically at square 1 again. The bank did assigned the same negotiator, though, so the lawyers are trying to call and explain the situation to him. Meanwhile we need to tell our landlords if we're staying or going by this coming Wednesday...
Today the seller's agent asked if we would be interested in taking "pre-closing possession"- regardless of whether we have an answer from the bank by the end of our lease, we could move into the unit- pay HOA and utilities until we find out. Lawyers and realtors think its a good idea... Help!

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I'm not a fan of the pre-closing-possession, because it takes time and money for you to move your things, and if you take possession and then learn that your offer has not been fully accepted, then you're stuck either having to move into another place right away (at the new, higher rental market rates), or having to just accept any new terms that the bank presents. Perhaps you should ask your landlord for a new, "short-term lease", while you wait to hear back from the bank about the short sale. This could work well for your landlord, because he/she will no longer be in a state of limbo. The short-term lease could work for you because you wouldn't be incurring moving expenses until it's absolutely necessary; and, you'd be continuing to live in a place in which you are familiar (Even if your landlord raises the rent, it would probably be priced less than the current market rate.). Meanwhile, you'd wait to hear back from the bank, and can also continue to look for alternative homes, in the event that the sale doesn't work out. You might get lucky, and find a low-priced, non-short sale property that you like even better than the one you originally found.
1 vote Thank Flag Link Thu Aug 23, 2012
You could alternatively have a realtor help you to find a short-term lease elsewhere. Find a low-priced rental for a three-month-term, with an option to re-new, until you know more about your situation.
Flag Thu Aug 23, 2012
I agree with your thoughts in theory, but our current landlords have proved to be difficult time and time again. Despite the fact that our lease does not have anything about giving notice stating intention to renew the lease- they've been pushing for an answer since the middle of June (lease ends at the end of Sept). We finally emailed them back and were completely honest- explaining that we were waiting on a short sale, asked if we could have another 30 days to give them the answer (this was in mid-July, btw) and they immediately said "We wish you had told us earlier- you've put us in a bad spot- we're putting up a for rent sign and showing the apartment". They have wanted us to sign multi-year leases every year and have been completely unreasonable about everything we ask. They live in the suburbs and have never even been in the units- primarily commercial landlords- so the idea of doing a month-to-month is out of the question for them, unfortunately.
Flag Thu Aug 23, 2012
There must be more to this than you state because I find it hard to believe an attorney would agree to this just based on what you said. What if the deal falls apart? What will the lease say? Are you ok with all the potential hassles?
1 vote Thank Flag Link Thu Aug 23, 2012
I promise, their support for the idea seems equally confusing to us! I honestly expected her to be more cautious as she has been the cautious voice through this whole process. She obviously agreed that there are a lot of "what-if's", but her overwhelming opinion was that it is definitely worth consideration and not a terrible idea. She even mentioned it was something she'd considered suggesting if push came to shove.

We're apprehensive because we know everyone involved stands to make commission as long as we don't back out. On the other hand, we have no real reason to not trust them. In the end, no matter how sure they are about how things are going to work out, no one really knows, so their confidence about everything is slightly unsettling...
Flag Thu Aug 23, 2012
Personally I would explore the idea of pre-possession provided your attorneys can draft up language that protects you.

Paying only HOA and utilities certainly helps you save your funds, and your pre-possession may give you an opportunity to *try* out the home first.

Good luck!!
0 votes Thank Flag Link Sun Sep 2, 2012
Oh yeah, and if the bank moves forward with the foreclosure, it should move slowly enough for you to find another rental before they evict you.
0 votes Thank Flag Link Fri Aug 31, 2012
I am writing this comment from my new home, which was a short sale, which I took possession of 9 months before closing, so I am a big fan of pre-occupancy. The big caveat...buyer beware. If you are aware of the risks, if you've taken care to write the lease with some protections, you should have no problem. If the deal falls through and you have to move out in accordance with the lease terms, you are okay with that, because you went into the situation with your eyes wide open, aware of those risks and having decided, ahead of time, that the risks were worth the rewards. With such low rent, you have a lot to gain. As for the bank letting you...they have no say in the matter, if it's a short sale, the property still belongs to the seller and s/he can do whatever they want with it, including renting it to you. My deal worked out very nicely, I hope the same for you...
0 votes Thank Flag Link Fri Aug 31, 2012
I would ask your current Landlord if you can go month to month until you know for certain about the sale being accepted or not.
0 votes Thank Flag Link Sat Aug 25, 2012
I feel that there is more here. Pre closing possession can be a little bit of a hassle and its rare that a bank will offer it up. I would have your attorney go through all the details and take it from there.
0 votes Thank Flag Link Thu Aug 23, 2012
Thanks for the input- the bank didn't offer it as an option did, the seller's agent did. The unit has been vacant for the past 4 months. Our attorney is currently putting a rider together so all of the liability stuff is sorted out in advance if we decide to go ahead with it.
Flag Thu Aug 23, 2012
I would get more info on the status of the file. Is the bank moving forward with the foreclosure? Make sure you are dealing with a real estate team that is familiar with these deals.

Erik Sachs, CDPE
RpV Realty LLC
Cell 773/368-5515
Email esachs@rpvinc.com
0 votes Thank Flag Link Thu Aug 23, 2012
Emailed the realtor about this as we do not have an updated status- thanks for the suggestion :)
Flag Thu Aug 23, 2012
Ultimately, I defer to the advice of your attorney.

But, here's my initial thought. If you have the attorney making sure you are covered from all angles regarding liabilities on this, why not go for it?

If all you are paying is HOA and utilities, you could be there for a few months and have saved some money (toward that difference you are offering to make up of $15k) and what do you lose? If you don't want to stay where you are because the rent has gone up and other places have high rent...in the end, if you have to move out of this place, you are basically in the same position, just with a little more money in the bank.

You'll obviously have the cost of moving and moving into (and potentially out of) the condo if they have move in/out fees. So, take that all into consideration as well.

Now, I do have to say, be sure your Realtor has run the comps and feels that this property is worth the extra money. I never suggest over paying for a property in this market, and realistically, your lender could say it's not worth it in the end and not give you the loan once the appraisal is done.

Interested to see what you decide and how this all turns out in the end...keep us posted!

Cathi Weaver
Keller Williams Realty Partners
Web Reference: http://www.CathiWeaver.com
0 votes Thank Flag Link Thu Aug 23, 2012
Thanks for your insight- the comps do support the increase in price despite the original list price. We believe they listed it low in order to encourage quick offers, which makes sense. The price we came up to isn't the steal we were originally hoping for, but it is by no means a bad price for the unit.

Our largest concern currently is if we move into the unit, and then in 2 months find out we didn't get it- we will have lost out current apartment (which we like just fine), have to find another apartment (likely higher rent than we're paying right now), and we'll have to move again. Obviously I know in the end its a gamble and there is no correct answer to the situation- just shopping it around to get any advice is helpful :)
Flag Thu Aug 23, 2012
It is a risk that at the end of the day the deal gets cancelled, but if your advisors (Lawyers & Realtors from both sides & Seller) are aware of this and will advocate on your behalf, then maybe it is safer than it appears.
0 votes Thank Flag Link Thu Aug 23, 2012
You will find that we Realtors hate per-occupancy. You are taking a big risk that the bank might not allow the sale to happen, then you are in there with no chance of buying it. If it goes to foreclosure then the new owner might allow you to stay or kick you out. It's risky on your part. What is your lawyer saying?
0 votes Thank Flag Link Thu Aug 23, 2012
Surprsingly our lawyer said she thought it was a good idea. I'm nervous about all of the big question marks, but she (and everyone involved) seems to think we'll get the property at the price the bank asked for before...

Everything I've read says it's a bad idea, but then all of the realtors and lawyers working on it say it's fine. Confused!
Flag Thu Aug 23, 2012
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