the house I rent is in short sale. I was informed 2 days ago by the landlord. Should I continue to pay my rent to the landlord?

Asked by Lmb, Phoenix, AZ Sun Oct 16, 2011

I've been informed by a friend whose house was in the same situation that he, as the landlord, told the tenant that since he wasn't required to make payments of his morgage anymore, he didn't have to require payments from his tenant. He adviced me that I shouldn't pay anymore to my landlord until I hear from the new owner. I understand there's an investor interested in buying the house and he is willing to allow me to stay in the house as his tenant. So, my question is? whom should I pay the rent this month or next or until I know who the owner is? should I not pay my rent until this is solved? Please advice.

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Karen Peyton, Agent, Chandler, AZ
Tue May 12, 2015
Yes, you should pay rent. You are legally obligated to do so. You should continue to pay the same person you have always paid - until you know otherwise.
Whatever your landlord does with the rent money he collects from you is his business - not yours. He is the only person held accountable (and responsible) to the mortgage company for repayment of his loan.
He owns the property until sold or foreclosed.
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Luis Jimenez, Renter, Chicago, IL
Tue May 12, 2015
I also have a similar situation, the apartment I rent in a house that is a short sale, I was told by the landlord that they are going through the process and he does not know when the closing will be but when I moved here 5 years ago he did not want to renew my lease after 6 months. So I have no lease, the house is a short sale. Do I have to pay rent since he also refused to create another lease for my safety?
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Ijecktrulia, Home Owner, United Neighbors Together, Rochester, NY
Sun Nov 3, 2013
Hi Lmb

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Matt Puzz, , Phoenix, AZ
Mon Oct 17, 2011
Pay your rent and pay it buy a check or money order so that it can be traced and recorded. There will be a time that you will have to enter into a new lease or buy a home and having that documentation working in your favor can help your cause. What your landlord chooses to do in the affair of the home ownership has nothing to do with your lease. I am not a lawyer just a lender that sees this kind of stuff all the time come across my desk. If you are ontime with your payments and the new buyer comes to you to break your lease it can also give you more leaverage for a buyout of the lease.

Matt Puzz
Licensed Loan Originator
Amerifirst Financial, Inc.
1910 S. Stapley Drive #209
Mesa, AZ 85204
Direct: 602-410-9333
Office: 480-682-6617
Fax: 480-344-3687
NMLS# 213777 AZ LO-0915068
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Sean Heideman, Agent, Phoenix, AZ
Mon Oct 17, 2011

I agree with all the other brokers regarding the payment of your lease payments to the landlord. The landlord still owns the house and you have an agreement which is a legally binding agreement.

To add to the topic, the property is more than likely in foreclosure or will be in foreclosure sometime in the near future. Good news for tenants! The federal government passed a law in 2009 stating that if a home is sold at a trustee sale auction and the buyer is an investor, then the investor must honor the lease agreement as long as the tenant is current on all lease payments. Also, if the buyer purchases the home to live in as a primary residence, then the buyer must give the tenant 90 days to find another place to live. Therefore, either way you are fully secure in the place you live. Here is a copy of this federal law passed in 2009:

Please let me know if you have any additional questions.

Sean Heideman, Realtor
ZipRealty, Inc.
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I have a question. My sister in law is buying a home through a short sale. They moved into the home and have been renting it until the sale closes. This morning she was greeted with a foreclosure notice. They've been paying rent to the owner who according to my sister in law has been pocketing it. If she had a lease for renting, can they be booted from a foreclosure or is the foreclosure null and void since the house is under contract?
Flag Tue Nov 13, 2012
Doug McVinua, Agent, Gilbert, AZ
Mon Oct 17, 2011
You are likely bound by the lease that was signed. Now, what does the lease say? Have you spoken to the owner about the lease? Do you want to move? Do you want to stay even if it sells?

Short Sales can take a while, you need to to answer some questions and then find answers to the new questions that arise.
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Dr.Stevens I would find another place to live right away. Don't wait until the last minute. You have the time to find what you can afford.
Flag Sat Jul 4, 2015
Jason Webb, Agent, Glendale, AZ
Mon Oct 17, 2011
Hi Lmb,

Nothing should change for you until house is sold. Contrary to Shanna's comment, in Arizona, just moving out is probably not an option. A lease agreement is a binding contract. If you break any terms of the agreement, there will likely be consequences. I have attached a link to the Arizona Landlord and Tenant Act. The Landlord and Tenant Act clearly outlines what you can and cannot do unless otherwise agreed upon in writing (the lease). If the house is sold, the new owner has to honor the terms of the lease. The only thing that changes is the landlord and who payments are made to.

If the owner is not making their payments to the lender, the lender may be entitled to the rent payments. Unless you receive something from a court instructing you otherwise, your payments should be made to the owner/landlord per your lease agreement.

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Jeffrey Masi…, Agent, Scottsdale, AZ
Sun Oct 16, 2011
Dear LMB:

If the home is in a short sale, the seller still owns the home until it is sold. This is different than in a bank owned home where the bank actually owns the home.

Talk to your attorney and ask them to read your lease agreement and provide advice. Generally, if the home is still owned by your landlord your contract should still be with the landlord or owner.

Jeff Masich
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Greg Paielli, Other Pro, Phoenix, AZ
Sun Oct 16, 2011
Hi Lmb,
The house is stilled owned by the same person from how I understand it. If that is so I would highly reccomend to pay your rent if you want to stay. Thanks and Good Luck
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Shanna Rogers, Agent, Murrieta, CA
Sun Oct 16, 2011
Hi Lmb,

You have an agreement with your landlord to pay rent so you can live in the house. Since you still live there, you need to pay your rent (to your current landlord since they still own the house). If you don't pay the rent, you are technically trespassing, which is against the law. Or, you can move out if you are not going to pay the rent to live there. Just because your landlord is doing a short sale doesn't mean you can live there for free. Your landlord may still be paying their mortgage, but even if they are not, you are legally obligated to pay rent. Not everyone who does a short sale stops paying their mortgage. And, not everyone doing a short sale actually sells the house - some decide to keep it and try to make it work (may do a loan modification, etc.) or they may foreclose.

So, all that said, pay your rent.

Shanna Rogers
SR Realty
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Frank Becerra, Agent, Las Vegas, NV
Sun Oct 16, 2011
I was a councelor at a housing non profit group and have had that question asked many times, and the answer is not complicated.
You signed a lease and you are contractually obligated to pay the rent, or face eviction. Unless there is clause that talks about not paying the mortgage, it stays the same.
The current owner is who you pay rent until the lease is transfered to the new owner when the ownership of the property changes.
Good luck, and please do not hesitate to ask if you have more questions.
Also, consult your local laws
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what if there is no contract anymore? we were soppose to renew it but, they then said they were selling but didnt mention it would be a short sale
Flag Thu Apr 12, 2012
Dan Tabit, Agent, Issaquah, WA
Sun Oct 16, 2011
You have a contract with the owner that doesn't change just because of their financial situation. Legally I believe you would be expected to pay rent unless your owner tells you otherwise. Your friend’s situation is unique. Most owners in a short sale scenario are in financial hardship through the loss of job, illness or other unfortunate circumstance. Your rent may be what they are using to eat or pay the mortgage on their home. The only way you'll know for sure is to speak to them.
The one thing you should consider is the status of your damage deposit. You may be able to work something out about that prior to the short sale being complete. Most short sales take 6 to 9 months or more so chances are you'll be there for a while.
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Gary Geer, Agent, Antioch, IL
Sun Oct 16, 2011
Your landlord is still the owner of this property during the short sale period. You are obligated to continue to pay your rent to him. If you don't you may be evicted and may loose any security deposit. If you have a lease check that document . If you decide that you don't want to pay him rent anymore, I would consult an attorney before taking such action for guidance.

All the best,
Gary Geer
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Miritssa Cas…, Agent, Cave Creek, AZ
Sun Oct 16, 2011
You must continue to pay the rent to the landlord. Have you considered buying vs. renting?

We have great buys in the Phoenix market today combined with low down payments (3.5%) and the lowest interest rates in history. If you are interested please contact me.

Milly Casas

Milly Sells AZ
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Jon Hegreness, Agent, Scottsdale, AZ
Sun Oct 16, 2011
First off be careful following advice on this blog about you should or should not continue to make your payments. You might want to consult an attorney to review your contract with you.
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Laura Feghali, Agent, Stamford, CT
Sun Oct 16, 2011
Hello Lmb,
Yes, you must continue to make your rent payments to your landlord regardless of his situation.

Your leasing contract is with your landlord; not his lender so you are bound to the rental agreement and still must comply to the terms on the lease.

I suggest that you look at your lease to determine any consequences for non-payment.

Good luck to you!

Laura Feghali
Prudential Connecticut Realty
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