If I buy a short sale home, can I rent or lease purchase the same house back to the orginal owner....?? Are there any laws governing this in Florida?

Asked by Larry, 33993 Tue Sep 27, 2011

Help the community by answering this question:

+ web reference
Web reference:

Answers

26
Don Tepper, Agent, Burke, VA
Tue Sep 27, 2011
Even if you could--recognizing the cautions regarding the arm's length transaction and the warnings regarding bank fraud--it'd be a terrible idea.

The previous owners have to get on with their lives. You might think you'd be doing them a favor by renting them back the home they lost. Or, even worse, offering it as a lease-option. There have been various abuses of that strategy. A number of states, including Maryland, have passed laws which (to oversimplify) make it a felony to do what you're planning. I don't know if Florida is one of those states. The problem often arose over miscommunication--intentional or accidental--between investor and former owner.

Bad, bad idea.
1 vote
Ray And Karen…, Agent, Mount Dora, FL
Tue Sep 27, 2011
Hi Larry!

It's typically not allowed.

It's considered bank fraud and is usually investigated by the FBI.

Not the kind of folks who have a sense of humor :-)
1 vote
Randy and Vi…, Agent, Punta Gorda, FL
Wed Nov 19, 2014
Realtors are not lawyers and can't give legal advice. Short sales do come with an addendum and arms length transaction form that you as the buyer must sign. Be very careful here and contact a real estate attorney if you plan on going through with this idea
0 votes
Teri Zanella, Agent, Cape Coral, FL
Tue Nov 18, 2014
I would suggest you contact a Florida Lawyer specializing in Real Estate.
0 votes
Paula Raymond, Agent, Killeen, TX
Tue Mar 18, 2014
You can do whatever you want after you own the property. The rules are against the current owner or immediate family buying the property in the short sale or out of foreclosure.
0 votes
Barbara Klare, Agent, Fort Myers, FL
Tue Jan 29, 2013
Usually at closing the buyer, seller and agents involved sign an “Arms Length Affidavit”. The affidavit states the seller can not dwell on the property. If you rent to the seller it is fraud.

I agree the banks insisting on this arraignment are stupid. Many distressed owners would want to stay in the home. Buyers have to go through the task of finding tenants.
0 votes
Maria Apgar, Agent, Bernardsville, NJ
Sat Oct 8, 2011
The seller would have to notify the lender if this is something that is being discussed by you and the seller. The bank can claim mortgage fraud. There can be no under the table agreements between the parties. Your best bet is to speak with an attorney who has the best knowledge for this type of situation.
0 votes
Alex Mercado, Agent, Linwood, NJ
Sat Oct 8, 2011
In most cases no. there will usally be some type of verbage in the short sale approval letter stating that you can have no such aggrement
0 votes
Steven Ford, Agent, Memphis, TN
Thu Oct 6, 2011
If the loan you get on the property is designated for an owner-occupant...then you would not be able to lease it back. If it is an investor type loan where you are put through the rigors of qualification, higher interest payment and larger down payment....and the lender knows it is an investment property...then I believe you are within your rights to lease to whomever you want.

If you are a relative of the seller then there might be some issue...your closing attorney should be able to advise you further.
0 votes
The Stephen…, Agent, Portland, OR
Thu Oct 6, 2011
There are usually Arms-Length agreements that prohibit something like that. I would be extremely careful!
0 votes
Justin Ruzic…, Agent, Greenville, SC
Thu Oct 6, 2011
boarder line fraud on that. the lenders will probably have language in short sale approval not allowing the such. here is a good article on short sales.

http://blog.house-guy.com/category/everything-about-short-sales/

best of luck
0 votes
Christina Mo…, , Fort Myers, FL
Tue Oct 4, 2011
You might want to contact an attorney just to be sure. Great question!


Good Luck to you!!

Christina Morabito
Realtor
Florida Future Realty, Inc.
239-849-8500

“The opinions expressed herein are those of the author and/or commenters and may or may not represent the views of Florida Future Realty, Inc."
0 votes
Danielle Sha…, Agent, Cape Coral, FL
Tue Sep 27, 2011
There are no laws governing a short sale transaction regarding renting or lease purchasing a property back to the people you purchased it from. However, the seller's lender(s) may require a signed and notarized affidavit (as discussed numerous times below) outlining deed restrictions and whether or not they will allow this type of situation. Most lenders are adamant that it not happen as it is looked upon as mortgage fraud. Whatever documents the sellers lender sends back with the approval letter I would read over with a fine tooth comb and be extremely sure before proceeding with the sellers.
Web Reference:  http://www.mysharphomes.com
0 votes
Marc Comisar, Agent, Bonita Springs, FL
Tue Sep 27, 2011
You will need to read the addendums.


jessemcgreevy@gmail.com
239-898-5329
http://www.Bonita-Estero-RealEstate.com
0 votes
Sharon E. Ti…, Agent, Cape Coral, FL
Tue Sep 27, 2011
Hi Larry, It depends on the individual lender and how the Arm's length statement reads. Most lenders will not allow for a leaseback, I had different situations, 1 where the lender was going to allow the previous homeowner to stay and rent from the new investor homeowner who as purchasing his short sale home, and the other situation, the bank was making the family move out and find a new home. So, Usually the banks don't like it or allow it and will make you sign an affidavit stating that you wll not be selling back or renting back to the previous owner. And if you do after signing such doccument, it would be fraud. Whatever the situation it has to be disclosed in advanced.
0 votes
Scott Godzyk, Agent, Manchester, NH
Tue Sep 27, 2011
Larry you definately need to see if the sellers bank asks the buyer and seller to sign an affadavit they they will not be selling back to the original seller or even remain in the house. Some banks do not, but some do, find out first...

http://www.trulia.com/blog/scott_godzyk/2010/10/so_you_want_…

Please see my blog for tips on buying a short sale
Web Reference:  http://www.ScottSellsNH.com
0 votes
Susan Burhoe, Agent, Matlacha, FL
Tue Sep 27, 2011
Hey Larry-

What everyone is saying is very true.
Should you decide to make a purchase of this home, if you are not already in the process of it, it would seem advisable to start with a new tenant who has no relationship to the property.

Please let me know if I can be of any further assistance.

All the Best-

Susan Burhoe
Broker
0 votes
Dave Griswol…, Agent, Bridgewater, NJ
Tue Sep 27, 2011
Hey Larry, We could be wrong judging from the answers below. We do know you can rent to whomever you want but if your purchasing and leasing together then we'd say all below are correct that would be a problem.
However if you purchase then later lease it to the orginal owners we just can't see where renting it to them would be an issue.
We're not talking about lease purchase we're talking about simple renting it to those who owned it before.

all the best
Dave & Lisa
Web Reference:  http://www.urhomerealty.net
0 votes
Mark Washburn, Agent, Cape Coral, FL
Tue Sep 27, 2011
As others have mentioned, you will be required by the seller's lender to sign an arms length transaction affidavit as part of your closing package.
0 votes
Mark A Zinn…, Agent, Cape Coral, FL
Tue Sep 27, 2011
I,m right there with Terry McCarley and her answer that the banks are requiring the seller and buyer to sign an arm's length transaction affidavit that states there are no agreements allowing the seller to remain in the home after closing.
0 votes
Margie Birch, Agent, Cape Coral, FL
Tue Sep 27, 2011
Hi Larry,
I agree with Terry. Part of the short sale agreement with the bank is that it must be an arms-length agreement. That means no relationships between buyer and seller. The seller cannot benefit in any way from the short sale, and it would be a benefit for him to remain in the property. It may be different in other states, but Florida won't allow it.

Hope that helps,

Margie Birch
Selling Paradise Realty
mbirch1@comcast.net
239-691-1303
0 votes
Donna Bishop, Agent, Cape Coral, FL
Tue Sep 27, 2011
Most Lenders today require the Buyer and Seller to sign an "Arms Length Agreement" . this agreement states that Said parties do not have any agreements written or implied that will allow the seller to remain in the property as renters or regain ownership of the property at any time after the execution of this transaction.
This is signed by all parties, buyers, sellers and agents.
For more information on short sales please visit my blog: http://www.CapeCoralShortSales.info
thanks
Donna Bishop
0 votes
Voices Member, , Cape Coral, FL
Tue Sep 27, 2011
Hello Larry,
Most banks require you to sign a document called an Arms length. This document states that you are not related to the seller and/or will not be selling the home back. It also states that you will not be renting the home back to the current owner.
Katie
0 votes
Carolyn Gian…, , Cape Coral, FL
Tue Sep 27, 2011
I've done some short sales where the buyer and seller must sign a document from the bank stating that there are no side deals between them. I definately would stay away from a "lease purchase". Renting it back to them might be ok. I have also done short sales where the lease was signed and deposits made before we ever got to the closing table. It will really depend on the bank.
Carolyn
0 votes
Terry McCarl…, Agent, Cape Coral, FL
Tue Sep 27, 2011
I must disagree with the answer stating if the home is in your name you can lease it to whoever you want to. I handle a very large number of short sales and 99.9% of the banks are now requiring the seller and buyer to sign an arm's length transaction affidavit that states there are no agreements allowing the seller to remain in the home after closing. I will be happy to email you an arms length agreement for your review if you would like for me to.

Terry McCarley, Realtor®, CDPE
Jones & Co Realty
email: leecountyrealtor@earthlink.net
cell: 239-707-4575
0 votes
Dave Griswol…, Agent, Bridgewater, NJ
Tue Sep 27, 2011
HI Larry, If you buy the home it's in your name, your mortage it's up to you who you rent it or not rent it to.

All the Best

Dave & Lisa
Web Reference:  http://www.urhomerealty.net
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more