I found out the house I was purchasing was a short sale the night before settlement and couldn't close. Since I was left without a place stay

Asked by Tl, Boothwyn, PA Mon Nov 16, 2009

and in anticipation that the short sale process would take at most 2 months to complete, the owners allowed a pre-settlement move-in free of charge as long as I agreed to pay utilities and maintain the homeowner's insurance policy on the property that I pre-paid. It has now been 3.5 months and we still have not closed. The BPO on the property has just been done, so things are looking like they should be completed within the next month or so. However, the sellers are now asking for rental compensation while I reside in the house until closing. At the same time, I am pouring money into the house on repairs caused by the contracted work done as part of our AOS that wasn't done properly and regular pool and house maintenance. The property is in foreclosure status and recently received a "stay" on the sheriff sales list. Do the seller's have a right to ask me for rental compensation? Do I have a right to negate this rental request due to the fact that I am in fact maintaining the property and k

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James Gordon…, Agent, Hamilton, OH
Tue Nov 17, 2009
BEST ANSWER
TI the seller can ask for the property not to go forward on the short sale. The lender may also require the seller to sign a note for some or all of the short fall. The seller may refuse to sign the prommisary note for the lender. At that point they would have to bring money to close the sale. Double check with your agent and see what their feel is on the rental.
By the way which lien holder is doing the BPO the first or second? If it is the first they may not give the second a full payoff and the seller will have to get approval from the second to go short also.
Web Reference:  http://www.Find1Home.com
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Scott Godzyk, Agent, Manchester, NH
Mon Jun 27, 2011
This should havbe all been negotiated BEFORE you moved in... and should be in WRITING. Verbal contracts are not enforceable in most cases. I always ask if you are not paying your mortgage, what is the rent for??? Hopfully you have a buyer broker experienced in short sales to help you, if not you will probabily want a lawyer to assist you. You should make sure any agreement includes who pays what to who and for what... including but not limited to property taxes, insurance, water, sewer, maintenance, repairs etc....
Web Reference:  http://www.ScottSellsNH.com
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Tl, Home Buyer, Boothwyn, PA
Wed Nov 18, 2009
Hi Karen - yes you are right I am being introduced the hard way! But I always say what doesn't kill you only makes you stronger it's a learning experience for all of us I think. My realtor is also a licensed attorney so no worries there on the legal side. At this point we're just hanging tight and waiting on the bank's approval, no point negotiating if they haven't even approved it yet right?

Thanks so much for taking the time out to respond. That goes for everyone...You're collective insights have truly inspired!
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Karen Wisne, Agent, Westerville, OH
Wed Nov 18, 2009
OK, sorry. It just said realtor/attorney, which I didn't interpret as you have both (or is it the same person?). Realtors are not allowed to give you a legal opinion unless they have a degree in law also. I'm not sure if the seller isn't obligated to sign off on the short sale if it approved by the bank. They agreed to a purchase contract with you, which should have included something along the lines of "subject to bank approval" . Meaning that as long as the bank approved it, they were good with the deal. So you should just be needing the bank approval at this point. The seller shouldn't need any further incentive?

If your realtor is also your attorney, you may want to get another attorney to review your written lease. (unfortunately, for your best interest, this needs to be done by a licensed attorney) It needs to be a very precise lease which details who, how much and for how long this can go on (and a whole long list of "what if's" answered).

I would also make sure your realtor's Broker is involved at this point. Not to get your Agent in trouble, but there are many things that need to happen right for you to close successfully, and your Agent's Broker will be more equipped to handle it.

Again, TI, good luck. you are being inducted into homeowership the hard way!

Karen
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Tl, Home Buyer, Boothwyn, PA
Wed Nov 18, 2009
Karen - thank you for your response. As James mentioned I am represented by an attorney. I am just seeking other legal opinions. I am no longer making repairs until the bank approves the short sale and we have settled. It is my attorney and I's sentiments exactly that there should be no rent paid on top of repairs/maintenance however, we are worried that they could possibly refuse to sign off on the short sale. We don't see what good that will do to them because then the house will be sold in a Sheriff sale and the seller's credit will take a huge hit, but it is possible that they could do this if Credit has no value to them.
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James Gordon…, Agent, Hamilton, OH
Wed Nov 18, 2009
Karen if you would read the stream Ti is represented by an attorney
Web Reference:  http://www.Find1Home.com
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Karen Wisne, Agent, Westerville, OH
Wed Nov 18, 2009
TI,

Truthfully, this is a job for a real estate lawyer.

A short sale is never guaranteed to close, and if it does, it could take another 6 months. Most likely the seller was not aware of how long it would take either, however since the house is in foreclosure your future with the house is in serious question. If it was me, I wouldn't pay rent on top of repairs (if they are landlords, they would be responsible for fixing things). I also would stop making repairs and find a new house to buy. I imagine your sales contract has expired by now?

Good Luck!
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James Gordon…, Agent, Hamilton, OH
Wed Nov 18, 2009
TI the second is waiting to see how much the first will allow them to get out of the proceeds. Sometimes the second will ask the owner to sign a note for the deficiency or a portion of it. You may find that the addendums that you sign for a short state that the seller will not see any proceeds from you, in other words that there are no side deals on the property. Check with your agent about rental and repairs now that this has come up after you negotiated the original contract.

In my opinion there is no way that they would get any cash before closing.
Web Reference:  http://www.Find1Home.com
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Tl, Home Buyer, Boothwyn, PA
Tue Nov 17, 2009
Hi James,

My realtor/attorney feels that if they threaten to not sign off on the short sale then we should offer them some kind of rental compensation but deduct expenses spent on the house for maintenance and repair prior, and bring whatever amount that is agreed upon to settlement rather than paying ahead of time. This will give the seller incentive to sign off on the short sale. Since we currently don't know if the offer has been accepted by the bank my realtor recommending not giving one cent. By the way, the BPO was done by the primary lien holder. Apparently the listing realtor has been in touch with both lien holders. The secondary lien holder is waiting for the response from first lien holder. Hopefully there won't be a bidding war. :-(
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Tl, Home Buyer, Boothwyn, PA
Tue Nov 17, 2009
Hi Fran & Mark,

Thanks for your response. The problem with getting out now is that the deal is so close to being closed (within 45 days they expect) that if I move out now I'm afraid that the amount of things that will go wrong with the house will cause me mass amounts of money to repair once it is officially mine. For example: There is an active leak in the house. The pool needs to be closed very soon otherwise there will be damage to the pipes and if the sale goes through, I will be left with that repair. Forgot to mention that the sellers are going through a divorce, the house is in the wife's name, the husband has an abusive history and has actually threatened me once during our negotiations...who knows what he'll do to this house if he gets back in here before closing. He has no motivation since he's not getting a cent from this deal due to it being a short sale. I'm a rock in a hard place...
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Fran and Mark…, Agent, Yardley, PA
Tue Nov 17, 2009
Tl

You are a tenant do not put any money into repairs. Get out until the seller comes to terms with his mortgage companies. In the future consider getting your title work done early or run a "short Title", also known as a mortgage and judgment report if you even remotely expect a problem.

Fran and Mark Redding
Prudential Fox Roach
1010 Stony Hill Road
215-504-7500
215-321-3307 DIRECT
http://www.FranandMark.com
0 votes
Tl, Home Buyer, Boothwyn, PA
Tue Nov 17, 2009
Hi Terrence, not sure what you are referring to with "getting some of my money back" are you referring to the money put in for maintenance and repairs?

James - thanks for the great response. I am working with a Realtor who also happens to be an attorney. The seller and I both signed a pre-settlement move-in agreement with the terms that I would cover utilities used while I was there and that I would maintain an insurance policy. The transaction didn't start out as a Short Sale, all steps were taken as a normal purchase, negotiations, inspections, etc...but on the eve of settlement my titling company found that it was in fact a Short Sale property and we could not settle because the difference in price was some 12K off. This was never disclosed by the Listing realtor and my realtor had inquired multiple times.

The leans I know of are 2 mortgage liens on the property, there was also a water lien (which I paid for to keep the water on while I was here) and a tax lien. Not sure if there are any others. Just got news in that we've been assigned a negotiator and that settlement could take another 30 days. My question is can the owner legally block the short sale if the rental situation is not settled?
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Terrence Cha…, Home Owner, Allentown, PA
Tue Nov 17, 2009
Whoa! What are you doing?

1 - Get an attorney. ASAP. Do whatever he says. You may have lost any legal holdings you would have had and hopefully you can at least get SOME of your money back.

2 - After the dust settles if you find you need a home. Get a real estate agent to represent you and if you had one then fire him.

Terrence Charest, e-Pro
0 votes
James Gordon…, Agent, Hamilton, OH
Tue Nov 17, 2009
TI you moved into a short sale property that was not clear to close? This is not legal advise. First I would stop doing repairs to the property because you do not know if the lender will approve the short sale! Do you have an agent working for YOU in this transaction? The sellers have the right to ask for anything. You have the right to counter anything that they ask for. Maybe you would want to send any rent to the lender in hopes that they would look favorably on your transaction.
By the way how many liens are involved on this property?
Web Reference:  http://www.Find1Home.com
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