Home Buying in 02864>Question Details

Captainobvvi…, Home Buyer in 02864

Should I be wary of the terms of short sale offer? How long do you think it will take considering circumstances?

Asked by Captainobvvious, 02864 Tue Dec 20, 2011

I have submitted an offer on a short sale that is at or close to fair market value... I am the only offer and am locked in for a term to prevent them from submitting a back up offer to the bank for as long as I keep myself locked in.

When I first looked at the house the BPO had already been there and they already have a short sale negotiator assigned to the case but they do have two liens on the property. They told me if I offered $10k more it would completely satisfy one lien holder so they can't owe that much.

My question is in two parts:
1. Considering what I have shared do you think it will take 6 months to close on this house?
2. The sellers have asked that I agree to let them rent back the property and stay there until June of 2012 until their kids graduate. I wonder if their agent thinks it wont take AS long to close and if it does close relatively fast I am stuck with a home I own and tenants for 4 months.... Do you think that is reasonable for me to agree to?

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Related to rental payments: If all is agreeable with your lender, their bank, and other involved third parties I would suggest collecting your rent payments in advance from the sellers in the form of a bank check or cashier's check. Perhaps, two month's in advance then month-to-month. The sellers are obviously well behind on their mortgage payments so they will have the money. If the deal falls through you simply reimburse the sellers back their money. Of course, a good real estate attorney will be needed to ensure proper documentation of the situation.

It would not be wise to agree to rental payments without advance compensation especially to sellers in pre-foreclosure. Take care of you and your family first and foremost. Good luck to you!
0 votes Thank Flag Link Thu Dec 22, 2011
Captain, please remember that the owners, however well-meaning, are basically going to escape a debt of more money than they can afford to repay. They may have completely stopped any attempt to repay that debt. I don't think it is a good idea for you to rent the property back to them. There are plenty of apartments that will now accept tenants who are in this situation, but they may require larger deposits (or higher rents depending on State laws).
0 votes Thank Flag Link Wed Dec 21, 2011
Also don't misunderstand that you should not be renting this house at all I know in some cases sellers need some time to move out but if they are doing the hafa shortsale they are getting back min of 3000.00 to assist them in moving expenses also it is against the terms and conditions of your new mortgage which prevent you from renting out property unless you took and investment non owner occupied mortgage. I am having a class on the HAFA guidelines on January 7th at 5:30 in my office if you would like to attend and get somemore information.
0 votes Thank Flag Link Wed Dec 21, 2011
I really don't like to go against another agents deal but shortsales are not like they used to be,the seller can now get an approval with the bank right away and the bank tells the agent what to list the property for that way the bank doesn't come back and tell you they want more money for the house than what your in p & s for. The new government guideline are quite specific and you should be able to close pretty quickly. Regarding the 2nd mortgage the 1st mortgage company will allow up to 5,600 to be given to the 2nd lien and usually the 2nd mtg company agrees to this number. As for the former owner staying in the property that is entirely up to you but most loans that are given to buyers to purchase property requires you to move in within 90days as this is owner occupied loan and you have to occupy property,now if the tenant doesn't pay the rent you need to evict them and now you with have additional costs that you were not expecting and if your not careful you could be shortsaling this home once again. My point is just be careful in making this decision think of all the things that could happen before you jump into it. If the bpo was done the property should have been listed for what the bank asked the seller to list it for and you shouldn't have had to come up any higher but in the defense of theother agent there may be circumstances I amnot aware of. Hope this helps...
0 votes Thank Flag Link Wed Dec 21, 2011
Sorry, misunderstood you. The lender will not agree to a rent back. Don't put it in the P&S if you want the house. They'll reject the contract.
Web Reference: http://www.joedelsesto.com
0 votes Thank Flag Link Tue Dec 20, 2011
What I meant about making the transaction taking longer was agreeing to allow the seller to rent back contingent on their lender approving it.

Should I have that language included to allow them to rent back for 60 days or the end of June 2012 or whichever comes first CONTINGENT on their lender's approval.

Should that have any effect on the length of time it would take to get bank approval at all?
0 votes Thank Flag Link Tue Dec 20, 2011
Captain, that is correct, no length of rent back time is allowed. This requirement being included in the contract will not make the short sale take any longer as it is part of all short sale agreements anyway. Good luck with the transaction, I hope it goes well and closes quickly for you ! Joe
Web Reference: http://www.joedelsesto.com
0 votes Thank Flag Link Tue Dec 20, 2011
OK I have done my research into the "Arms length transaction" affidavit... It doesn't seem they mention any time table so I imagine even a short 30 day rent back would be out of the question for them yes?

I am sure it varies by lender but it doesn't look like this can (in most cases) be done in a short sale.

Will including this on the sale agreement make the entire process take longer? If it doesn't make it take longer maybe we can include language that makes the entire thing contingent on the language of the arms length affidavit making our personal agreement void should this be asked of us.

I am in love with the house and don't want to make the sellers not accept my offer but I am CERTAINLY not committing any kind of fraud.
0 votes Thank Flag Link Tue Dec 20, 2011
Captain, your lender may not care if you are renting back. But the sellers lender most definitely is against it for many reasons. Please check with the short sale negotiator and/or a real estate attorney. You most likely WILL be required to sign a legal affadavit that says the sale will be an arms length transaction, and will most likely also make you attest to the fact that the seller will be vacating the premises. If you get this affadavit, and lie on it, you could be opening yourself up for a possible problem if the bank finds out you have lied. If you don't get an affadavit to certify to this, then it may not be an issue. I recommend to all my buyers of a short sale, NOT to do a rent back as the lender usually does not want this to happen, and somewhere there will probably be some documentation stating this in your closing documents. Again, protect yourself and check with your attorney. The bank can take the property back AND you could still owe the mortgage on it.
Web Reference: http://www.joedelsesto.com
0 votes Thank Flag Link Tue Dec 20, 2011
My mortgage lender is telling me that FHA guidelines say I can agree to let them rent back for 60 days... Is this correct?

They seem like good people and would be paying more in rent than my PITI so it would give me some money to put away and I doubt it would even come to that... I don't mind the wait it gives me more time to save.

I just want to make sure, above all else that I am following the rules and regulations and am not committing fraud in the unlikely chance that it comes to that.
0 votes Thank Flag Link Tue Dec 20, 2011
Captain, here are some thoughts for you:
1. It could take 6 months or longer, or less. It all depends on how willing the bank is to accept the short sale, and even if they do accept, how quickly they can move the process along. It also depends on how amenable the second lien holder is to the short sale. Some banks are very very tough in approving these sales. Lastly it also depends on how willing the SELLER is to accept any and all terms as set forth by both lien holders to approve the sale, ie: theycould request a note to be paid by the seller for the shortage. This mostly happens with second lien holders.
2. Be very careful as to what you agree to with the seller in terms of a rent back. As part of the short sale agreement you will most likely be required to sign an affadavit that says you have not or will not be a party to any type of arrangement in this regard. This is very important: Talk to your lawyer about this. A breach of this agreement could result in the bank taking the house back from you, worse case scanarion if they were to find out. I would not agree to ANY rent back in a short sale transaction. You are putting yourself at risk. Please talk to a good real estate attorney before you move forward with this.
Web Reference: http://www.joedelsesto.com
0 votes Thank Flag Link Tue Dec 20, 2011
I didn't even think about the lender not being OK with me doing that. As I am getting a loan based on it being my personal home and not a rental property... I am getting an FHA mortgage too so that looks like a wrench in the plan...

As to the first part of my question I was hoping that since the BPO was already in the works (He has already been to the house to take pictures and whatnot) and that there is already a negotiatior at the table that it would be a good sign that things are already pretty progressed if not progressing... A lot of short sale snags I see from my research is that things take forever to just start moving.

I was never comfortable with the rent back... Just because I want to move in when I can because I'm excited... I just figured the owners seem like good quality people, it gives me more time to save, I would move in the summer rather than winter and I don't have to stress about when its going to close because I know either way it is going to take 6 months for me to move in... But if my lender would object anyway it might be out of my hands.
0 votes Thank Flag Link Tue Dec 20, 2011
It definitely will depend on the institutions involved with the short sale. My experience with short sales is some can take two months and others can take up to a year. However, this does not mean yours will be on the year end. Does the listing agent have a negotiator? If so, is he or she following up with the bank as well. There's so many different scenarios when it comes to short sales. How long have you been in contract with this property? Who is the two institutions involved?

When it comes to renting the property, you'll need to feel comfortable. What type of loan are you getting? Is it FHA? FHA mandates you have to reside in the property? Have you met the current home owners? You'll need to ensure you have a contract with them to ensure they move when June comes or you can be heading into an eviction?

Do you have a buyers agent? If not, please feel free to contact me personally for further assistance and I will do my best to answer all the questions/concerns you have. My office is located in Cumberland on Mendon Rd and my name is Monalisa. My direct line is 401-413-8581.
0 votes Thank Flag Link Tue Dec 20, 2011
Is the bank in agreement with the sellers renting back from you? The ones i have been involved with would object to that.
0 votes Thank Flag Link Tue Dec 20, 2011
The answer to your first question will depend on what institution(s) are holding the notes AND how proficient the listing agent is (sounds good from what you mention above). The second could be quite large and the lender could be a roadblock.

Answer to the second question... maybe... you sound like a thoughtful person, but be wary...

Good luck,
Shawn
0 votes Thank Flag Link Tue Dec 20, 2011
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