There may be a couple real good reasons to put/keep a tenant back in a home. The main reason is for property upkeep and securing the premises from potential vandalism. Short sales become easy targets for vandals because in many cases owners are gone and have little interest in the future of the property. There was a time when banks did not want anyone to benefit in these situations but they are beginning to realize that there are some hidden costs to leaving properties vacant. (Now you see them initiating plans to extend rental agreements to homeowners at market rents...)Someone still has to mow the lawn and keep the property safe while it is being marketed. If the owner/tenant is not doing it, then the burden falls back on the bank who has to hire a field service company to do it or face the code enforcement.

In your situation, the key would be to understand the lease that the seller has with a tenant. It can create some complicated situaitons if the tenant is uninformed of the situation and/or uncooperative. If the tenant is informed and cooperative and you like the home, then stay the course.

Banks want to get their money. They know the courts are backed up and a short sale is still the quickest path for them to get their money out of the deal with the least cost and presumably at a fair price. The banks go thru great pain to ensure that the price is fair and reasonable plus it is an opportunity for them to get something from the seller without going to the courts for it. The only reason that I am seeing currently for the bank not to complete a short sale is what they consider as ridiculous offers. if the offer price is fair, they will get the deal done. They can always press the seller for a deficiency judgment if they think the seller has something to give after the sale. In most cases, even if the seller is collecting rent there is still nothing left over for the bank.

Rick

Gayle:

YES!

But, let me ask why would you want to be involved with a scenario like this? Slap your agent upside his or her head and tell them to wake up and find you a home that you CAN purchase.

Mike Luzzo

Gay and Mark are right on. I have also seen sellers put homes on the market to slow or stop the foreclosure action with no intention of closing on the short sale. This move would allow them to live in the home free or rent it out and collect the money for maybe an addtional year!

The key to closing a short sale is the training and experience (track record) of the listing agent and having a great buyer's agent who can evaluate the listing agent and the short sale.

Gayle

You may want to get legal advice on this. I have heard that if an owner is in a short sale situation the Bank is not too keen on a rental situation going on with the property. First question Bank will ask is "Where is the money?" If you were the bank would you be wondering why this is a distress /short sale but you continue to make money but not sending it to us? How is this a distress? Many property owners are calling it a distress because their values went down. That is not the definition of a distress sale. You have to prove a financial hardship. Even if you lose value in your property but are still able to pay, this is not an invitation to the short sale party.

A bit of a ruse. Your contract should have had a clause that states that all the parties know about this lease. From the sound of it that did not happen. If the bank is made aware of the leasing this may put the Bank approval in jeopardy. NO SALE.

As far as what is allowed is certainly a question that we all ask ourselves everyday. This new market place has spawned many different scenerios that cause speculation and questions every day. Sometimes you need a score card to keep up with the changes. Good advice below is to check with the sellers agent and if it is a transaction without agents, then you may want to read your contract, see if you have expiration date on approval time (typically 45 days) and if not seek legal advice. This one may not be the one and may never close.

Good Luck
Gay Middleton*Moving You in the Right Direction
Realtor
gaymiddelton@orlandohomeresales.com

Hi Gayle,

Nice to see answers from around the country. We're in Florida, so I'll assume you used a FARBAR As-Is contract with the standard short sale addendum.

While the owner can indeed do anything they want while they own the property, it is hard to see much of an advantage to them to rent the property because at the end of the short sale, they walk away with nothing. Plus no renter in their right mind would rent a property if they knew it was in the middle of a short sale.

Have your agent contact their agent and ask about the progress of the short sale package. A legitimate, well planned short sale by an experienced listing agent should not take more than 45 to 60 days in today's market in Florida. The fact that only about 25% of short sales actually get closed says more about the listing agent's ability than anything else. If you can't get an acceptable answer, then clause 1 of the short sale addendum gives you the right to cancel the contract within 5 days after the approval deadline (which is 45 days if left blank).

Call your agent and talk to them.

Regards,
Mark LeMenager
Weichert, Realtors - Hallmark Properties

Yes....the seller still owns the home and will continue to do so until close of escrow...which could take 6 months or longer.

Hey, Gayle,

Does your contract include a clause that makes it subject to the bank's approval? If it does, the owner's signature is only a first step towards your being able to purchase the property. Short sales can get very drawn out, and the renting may be an attempt to help cover taxes, etc. until things get solidified.

Depends, did they rent it after you purchased the house, is it a short term rental for maybe a couple of months until it closes, did they already have a lease on the house?

The sellers are still the owners of the property until it closes. If they already were renting it out, then there probably is a lease agreement which will have the particulars of the lease agreement spelled out in them. They may have done a short terms lease say for 3 or 4 months the get extra money to put towards the loan. You will have to find out what the situation is regarding the lease.