Home Selling in Sacramento>Question Details

Victor, Home Seller in Sacramento, CA

Can the tenant stay during the short sale process and buy my rental property?

Asked by Victor, Sacramento, CA Mon May 30, 2011

My rental property is going to be in short sale soon. But tenant would like to stay and buy the property. Can they stay during the short sale process? Do I need to talk to my agent about the potential buyer? Can the agent represent both the potential buyer and myself? Thank you.

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Victor,

I must concur with and like Jim Walkers statement "banks don't give a rat's tail about state laws and make up their own as they go".


IMPORTANT GOVERNMENT DISCLOSURE: The brokerage is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
1 vote Thank Flag Link Mon May 30, 2011
You own the property until the Short Sale has recorded with new buyers names. Therefore you have landlord rights to do as you please until a new owner has taken possession. Yes as long as the tenants/potential buyers are an arms length away (not related by blood to the sellers) then they would have the same opportunity as any other buyer in the market to purchase the property. Depends on your listing agents desire to represent both sides. I do not have an issue but some realtors in the area are concerned that this may leave room for a law suit down the road. If you need any help with marketing your property let me know...
0 votes Thank Flag Link Thu Jun 2, 2011
Whether or not the same agent can represent both buyer and seller....check with your lender. Some banks will no longer allow this, and are looking even more carefully to make sure that the short sale is at arm's length. Sometimes, even if the agents are different but they're from the same agency, the bank may disallow the sale. Your listing agent can certainly research this for you. If he/she is experienced with short sales this is one of the must-do on the list.

Yes, your tenant may offer to buy the property (provided he is qualified and can provide proof of funds) --- but some negotiators may consider this not to be arm's length either.

You as the seller should also do your due diligence and check with your bank on what they will or won't allow.

Good luck!
0 votes Thank Flag Link Tue May 31, 2011
Victor,
If your agent does not have a lot of experience and time to handle the short sale (it takes a lot of extra effort to makes these successful), consider using 2 agents in the transaction. Make sure one of the agents hires someone to help with the short sale, or has a team in place to get the short sale done. You should have excellent communication with your listing agent - every week - keeping each other updated on potential buyers, status of the short sale, etc.
We recommend using 2 agents.
0 votes Thank Flag Link Tue May 31, 2011
The agents are mostly saying "yes" because there are no state laws against the tenant staying or buying the house. However, banks don't give a rat's tail about state laws and make up their own as they go. So even if the common sense answer is yes, none of us can know, yet, what your bank will answer to your question, because banks don't often rely on common sense to transact these short sales.

And of course the agent will inquire about the tenant during the listing appointment. If she doesn't ask about the tenant, I would be really surprised.
0 votes Thank Flag Link Mon May 30, 2011
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
Contact
Hi Victor,
Sorry to hear about the short sale on your property.

Your tenant has the right to purchase your property like any other buyer providing that they qualify to purchase it at current market value. All short sales need to be an arms length transaction.

Yes, you will need to tell your agent, how will they know that your tenant wants to purchase the home.

Yes, they can stay during the short sale process. If they can not purchase the home, you as the landlord need to talk about arrangements for them to allow the property to be shown. As long as arrangements are mutal . If they choose not to show property then you must seek other alternative in removing them from the property. Tenants can kill short sale deals. Why? They don't care if you lose your home it's not their concern.

Yes, your agent can represent buyer and seller provided that the broker, and all other parties agree.

IMPORTANT GOVERNMENT DISCLOSURE: The brokerage is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
0 votes Thank Flag Link Mon May 30, 2011
Hi Victor,

Yes, the tenant can stay in the property while you short sale it. We have closed short sales purchased by the tenants. However, the tenant's offer will need to be a good, fair market value, offer. We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states

MARS Disclosure for General Commercial Communications
IMPORTANT NOTICE:
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes Thank Flag Link Mon May 30, 2011
The tenant can buy the property if they are not a relative, spouse, etc as the lending institution involved will clarify in their forgiveness letter to you. The tenant should be able to stay during the short sale process, and yes definitely mention to your agent the tenant is interested. As for the "dual representation," I would speak to your agent about it. Some agent's are not comfortable with representing both the buyer and seller, even if local laws permit it.

In a short sale, as in a foreclosure, the seller should always speak to a licensed real estate attorney in their state and their accountant before proceeding with the short sale. The dual agency question may be something you put forward to your attorney to get their legal opinion.
0 votes Thank Flag Link Mon May 30, 2011
Mr. Tepper hit the nail right on the head with his responce. Just one additional thing to think about. If the tenants do not work out and do not make an offer on the home you might want to concider offering them a slight rental rate reduction. Why, if you end up having to show the property to a number of potential buyers you want the property looking its best and an a little break in the rental rate will go a long way. I have about 6-8 of these situations a year and you would be amazed what a slight break in the rent will do while on the market.
Best of luck,
0 votes Thank Flag Link Mon May 30, 2011
Hello Victor. Yes, a tenant can stay and buy as long as the tenant pays what the bank considers fair market value and the tenant is not related to you or in a business relationship with you (other than the existing lease). You have to be prepared that the lender will scrutinize the transaction more because they want to make sure the property has been adequately marketed and the transaction is what's called an arms length transaction. Yes, you need to talk to your agent about the tenant being a buyer as the listing agent is representing you in the sale of the property and will have to discuss the terms of the offer with you. Yes, the listing agent can theoretically act as the agent for the buyer and the tenant. I personally would, however, not recommend it, especially when the buyer is also the tenant. I am not a big fan of dual agency (i.e., one agent representing both buyer and seller) because of the potential conflict of interest and I don't think that working both ends on a short sale is a good idea. I know it can be done, but short sales are challenging enough and I personally would not want to add the additional element of the conflict of interest. If the agent is prepared to take on the challenge, the agent will have to expect that the lender will cut the commission payable, which could be a good thing for you because it leaves more for the lender.
0 votes Thank Flag Link Mon May 30, 2011
Ute Ferdig -…, Real Estate Pro in New Castle, DE
MVP'08
Contact
Yes definitely, you can have tenants stay during the Short Sale.
Your responsibility as a Lanlord is still take place, and your
tenants will also keep their responsibility as renters, and paying the rental to you.
As long as the lease agreement still in place, both tenants and owner should keep
their agreement in place, unless decided otherwise.
Web Reference: http://ww.vischa.golyon.com
0 votes Thank Flag Link Mon May 30, 2011
Your tenant can submit an offer, but it will have to pass through the
same process like all others. Your lender may question if you have
an "arms length" relationship, not related and no special terms to
them as the buyer. If your tenant is interested you should definately
tell your agent who can counsel you on the process. Yes, one agent
can represent both parties. We are currently representing a tenant
who is purchasing the property they are renting, so know it can be
done........but be aware all short sales have issues that will have
to be worked out.
Good luck
Patrick & Tina
0 votes Thank Flag Link Mon May 30, 2011
Yes, tenant can stay during the Short Sale process.
Yes, you should talk to your agent about the potential buyer.
The sooner you get a buyer for your property, the better, so then your agent
can start negotiate with your Lender.
Yes, and agent can represent both buyer and seller.
Good luck in your Short Sale.

Vischa Savitri
Lyon Real Estate
DRE # 01432142
http://www.vischa.golyon.com
916-290 3368
0 votes Thank Flag Link Mon May 30, 2011
Those are questions you should be asking your agent.

But generally:

Yes, your tenant can stay during the short sale process. You're still the owner and--most important--there's still a valid lease in effect. However, if the tenant stays, your agent would want to make sure that there's easy access to show the property and that the property shows well.

Can your tenant buy the property? I don't see why the tenant couldn't make an offer. The tenant would have to qualify, as would any other buyer. The transaction is supposed to be arms-length, though. Your agent can give you advice on whether, and how, selling to a tenant would qualify.

Do you need to talk to your agent about the potential buyer? Yeah. Otherwise, how's your agent to know about a potential buyer? In any case, you should be absolutely honest with your agent. But in the case of a potential buyer, of course you should communicate that with your agent.

Can the agent represent both the buyer and seller? That's called dual agency, and usually isn't the best thing to do. It's legal almost everywhere (I can't speak for California), but must be disclosed to--and agreed to by--both parties. Your agent can give you advice on whether--in this situation--dual agency is the best approach to take.

Hope that helps.
0 votes Thank Flag Link Mon May 30, 2011
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
Contact
Assuming that there isn't already a transaction; yes they can buy the property as well as anyone else. Just because they are living there now is not an obstacle. Other than the fact that the bank will see the same address for them.
Yes, the Agent can represent you and them; it is called Dual Agency and you both have to sign extra papers for that.
I can even recommend an Agent for you: Her name is Cathleen Watson, her phone number is 916-541-4662 and her e-mail is cwatson@norcalgold.com.
She is all aces and you will like her a lot.
0 votes Thank Flag Link Mon May 30, 2011
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