Home Buying in 90008>Question Details

Mamamia, Home Buyer in 90008

What does it mean when a REO is delivered occupied to the seller?

Asked by Mamamia, 90008 Mon Apr 5, 2010

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6
Mamaia
It means that if the property is subject to Los Angeles Housing Authority Rent Control.
See the link below.

It it VERY expensive (and almost impossible) to evict tenants, even for owner-occupation. That means if a lender is gong to minimize their loss they are not going to shell out thousands of dollars to deliver a rental property vacant.

It is typical for first time buyers to be totally unaware of these ramifications.
1 vote Thank Flag Link Mon Apr 5, 2010
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
Contact
This means that the tenant occupant will not be evicted prior to close of escrow, and that the buyer must inherit the tenant and deal with the situation at the buyer's own expense. This is happening, largely, because of the new foreclosure tenant laws that create extremely stringent guidelines about how a bank who acquires a property through foreclosure can remove a tenant. In certain situations, the bank calculates the risk and expense involved, and decides that it is in the bank's best interest to lower the price significantly and sell the property to an investor who does not require conventional financing (generally an all cash investor, or one using hard money), and is prepared to take on the risk of evicting the tenant on their own dime in exchange for a bargain price.

It's important to also understand that in the vast majority of these sales, there will be no opportunity for inspection prior to closing, therefore BUYER BEWARE. It would be fool hardy to purchase a property like this unless the discount is substantial enough to absorb the worst case scenario of both condition and eviction proceedings.
1 vote Thank Flag Link Mon Apr 5, 2010
That means the property is delivered with an occupied tenant. Not my favor situation.
0 votes Thank Flag Link Mon Jan 28, 2013
This is most definately not the way you want to take possession of real estate for reasons already expounded below. (thousands in costs to evict tenants etc)

If the bank wants to sell you a home REO, make sure that it is delivered empty in broom swept condition. Otherwise, lower the asking price.

Daniel Klein
Broker
Over 1 Billion Sold
800-640-8798
0 votes Thank Flag Link Wed Jan 4, 2012
Keith is very right about LA City properties that fall under the RSO - keep in mind that many areas of the County of LA are not subject to rent control, yet still have LA addresses. You can tell the City of LA limits by looking at the "White" colored sections on a Thomas Guide. County areas will be pink, or blue or...well you get the picture.

I'd suggest that before one estimates what "worst case scenario" costs for eviction proceedings that they seek the counsel of an attorney that specializes in eviction, and reference the specific address in your discussion. Different rules will apply to different areas. Santa Monica, for example, has it's own Rent Stabilization Ordinance, even though it's not in the LA City area.

Be careful out there!
0 votes Thank Flag Link Mon Apr 5, 2010
If you mean "delivered occupied to the buyer" this means that the property is occupied and it will be up to the buyer to deal with the occupants.
0 votes Thank Flag Link Mon Apr 5, 2010
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