Dcheri60, Home Buyer in 95776

Is there any additional risk to buying an OCCUPIED short sale?

Asked by Dcheri60, 95776 Sat Aug 6, 2011

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Mon Aug 12, 2013
Stephen is correct. Make sure you are not going to end up with squatters of any sort, unless of course you are getting the deal of the century.
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The Stephen…, Agent, Portland, OR
Tue Jul 17, 2012
Yes, you have to make sure there isn't a rental agreement. You could end up buying a home you can't move into! This is also true of foreclosed homes.
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Donna Meyers, Agent, El Dorado Hills, CA
Tue Jul 17, 2012
Buying a short sale property in California certainly does pose additional risk factors. I know that some banks recently started a policy having us agents get the seller to sign an agreement stating how many days prior to the escrow close date will the seller be moved. As an agent I preferred to work with the sellers on a move out plan once we have official short sale approval.

I had a unusual short sale escrow in which i represented the buyer in a situation where the sellers were keeping their mortgage payments current because they were told by a lender that they qualify to purchase another property 60 days after closing the short sale. None of that information was ever given to us on the buy side. Once the approval came in, that lender could not qualify the sellers and consequently they he decided, not to sell. Unfortunately for my buyer, it ended up that sellers made their decision not to sell, only 3 days prior to the scheduled close date. Ethically I think someone was not acting in good faith not having done proper research long before the escrow was opened. Its tough out there right now. My advice is to keep your eyes open, and use a experienced short sale agent as you work through a short sale escrow in California..
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Byron Hendri…, Agent, Sacramento, CA
Tue Jul 17, 2012
The banks prefer the home occupied if it is tenants in California it could be a problem if the tenants are still in the property after closing, the lender offers cash for keys and hope the eviction process is started prior to closing. A good thing is the home should have all appliances as negotiated in purchase contract. A good Realtor will help you with all this.
Byron Hendrick Keller Williams Realty Woodland CA. byronh@kw.com
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Bob Jakowini…, Agent, Livonia, MI
Fri Nov 18, 2011
That would really matter on the occupants. At least you know the major appliances are working and the home is livable. I have personally never had a problem with occupants in a shortsale but that does not mean it doesn't happen
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Terry Bell, Agent, Santa Rosa, CA
Thu Nov 17, 2011
Well, although it is beneficial to be able to get disclosures from owners that are still there, and know that the place is liveable, the fact is that the bank makes the owners sign a short sale agreement that they will have no benefit from the sale of the home, with the exception of a $3K cash for keys provision. Added on, the sellers then have their credit ruined. So, I can see that there might very well be a chance for a last minute surprise of an owner removing an appliance or something that you expected to come with the house, and I think it may be difficult to do much about it. So I would be cautious about whether you feel comfortable with the parties, and trust to work with them. My experience that most people have been honest and fair to work with, even though a difficult time for them. Best, Terry Bell, Realtor, Santa Rosa
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Susan Blanfo…, Agent, Kettering, OH
Thu Nov 17, 2011
I can only answer for the state of Ohio, since I don't know other states' laws. Who are the occupants? The owner or tenants? If it is the owner, they will be signing the Contract to Purchase and will understand the terms of the contract. It is based solely on the integrity of those who currently live in the home as to the condition of the property upon their vacating the property. If a tenant occupies the property and they are on a least or rental contract, you will have to honor their lease period for occupancy. No matter when you purchase, there is always a risk when purchasing a home that is either occupied or vacant. Although it doesn't happen often, I have heard horror stories of angry owners who have lost their home who come back to destroy the property. I've also seen many properties that are vacant which have been vandalized by thieves who take valuables out of the home. Good luck.
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David Black, , Laguna Niguel, CA
Thu Nov 17, 2011
In California it could be a problem if the tenants are still in the property after closing. Generally the lender offers cash for keys or the eviction process is started prior to cloing the transaction.
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Scott Godzyk, Agent, Manchester, NH
Thu Nov 17, 2011
The risk is if you close and they are still in the home, they become your problem. you may have to evict at your cost and will have to pay for anything they take or damage. Most mortgages will not let you close if the house is occupied at closing. It is great that they are there during the process as the house will be taken care of, but make sure they are out before you close.
Web Reference:  http://www.ScottSellsNH.com
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Derek Jensen, , Watertown, SD
Wed Nov 16, 2011
If they are currently living in there it can be very beneficial. At least you'll know the major components are in working order and it's currently turn-key. Of course you'll want to do a walk-through and request some type of inspection. Most banks require one. Basically, I'd think of it as buying a vehicle that is currently running vs one that says runs good but the battery is dead.
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Marco Gomez &…, Agent, Jackson Heights, NY
Wed Nov 16, 2011
There is no risk in entering into contract on an owner occupied home for sale that is a short sale, however if there is a tenant in the short sale that will pose a problem later on. Assuming the bank approves the short sale and the tenant is still in the home then you will have to close on the home with the tenant and later you have to evict them. The reason for this is that the short sale bank only gives you a short window to close on the property. My best advice is to consult with your attorney before entering into this contract with a tenant occupied property.

Hope this helps!
Marco Gomez
New York state associate broker
Keller Williams landmark to
Marco.Gomez@Gmail.com
Serving Queens, Brooklyn & Nassau
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Cris Goonan, , Clermont, FL
Wed Nov 16, 2011
It depends. Who is living there, a tenant or the owner. If owners are living there remember they are living there for Free, so they won't be in a hurry to leave. If tenants, are they willing and able to move out?
Be sure you are working with an experienced short sale agent, don't try to handle on your own.

Best of luck to you!
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Donna Meyers, Agent, El Dorado Hills, CA
Wed Nov 16, 2011
As a listing agent for short sales in the state of California, I have found that the owner occupied properties are more likely to get the attention of the bank negotiators. The sellers will qualify for the HAFA program if they have lived in the property in the last 6 months. Since the length of time that it might take for the bank to approve an offer,varies from bank to bank anywhere from 3 weeks to 6 months, it is not a good idea for the seller to vacate the property before having the bank approval. I agree that the seller or tenant should vacate the property 5 days prior to close of escrow. Those final days of a short sale there needs to be time first for buyer 's lender to fund and escrow must have the final HUD approved one last time from the closing officer at the short sale lender.
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Justin Ruzic…, Agent, Greenville, SC
Wed Nov 16, 2011
Often times there is less risk. One concern, that you as a buyer may have with the occupied property are, is the tenant motivated and able to move? If the "tenant" is the current homeowner, who is living for free, will not likely be motivated to move anytime soon as that means they would have to start paying rent somewhere. I have had many deals fall apart because of this issue. It is such an issue in Florida that JP Morgan Chase and Bank of America pay home owners, $3,000 -$30,000 to move out a couple days prior to closing, the only way the home owner gets the check at closing is if they leave the house broom clean.

Read more about the CASH home owners get from BOA and Chase here: http://wp.me/p1MLJl-6L

I would prefer to have home occupied vs vacant do to theft, broken water lines, and a host of other issues....good luck
Web Reference:  http://house-guy.com
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The Indy Pro…, Agent, Avon, IN
Tue Nov 15, 2011
This certainly could be pose issues. As was mentioned before, you will want to know that you are working with an experienced agent who is going to shoot you straight. There are multiple factors that go into a short sale. The issues with a tenant could include that over security deposits, repairs/deferred maintenance needed from an owner that couldn't afford, and back due rent from a tenant that has not been paying for awhile. You would want to know more about the tenants, their intentions, and their accurate payment history.

Thanks and good luck!
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Amanda Swan, Agent, Madison, WI
Tue Nov 15, 2011
If you make sure to get an experienced agent in short sales, you really shouldn't run into too many problems. It may be different in other states, but here in Wisconsin a property must be vacant at time of closing, and it is quite a rare occasion that occupied vs vacant makes any sort of difference at all.
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Jim Sweat, Agent, Venice, FL
Sun Nov 13, 2011
There are pros and cons to everything. Many of the answers cover the cons. One big advantage to having the home occupied, especially in Florida, is that the AC and utilities will still be in use. A vacant home in the Florida summer humidity is a potential breeding ground for mold and mildew.

Respectfully,
Jim Sweat, ABR, CRS, CDPE, GRI, e-PRO, ILHM
REALTOR
Sandals Realty
Mobile: 941-306-7384
Fax: 941-552-6039
http://www.JimSweat.com
http://www.ExplainShortSales.com
Web Reference:  http://www.JimSweat.com
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Dcheri60, Home Buyer, 95776
Sun Aug 7, 2011
Thank you all for the great advice. I will bear it in mind.
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Laura Coffey, Agent, Santa Clarita, CA
Sun Aug 7, 2011
I always advise my clients to stay away from occupied short sales. Whether it is tenant or owner occupied neither has much to loose by staying after the close of escrow.
If I have a client that absolutely loves a house and wants to move forward I write the contract contingent upon the final funds deposited in escrow that the property is vacant 5 days prior to close.
That way if for some reason they are not out you do not have to complete the transaction. If you need/choose to do so the most money you would be out at that point is a home inspection and appraisal fee.
I have heard too many horror stories from other Realtors of what could go wrong to not write any contingency in place.
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Walter 'Skip'…, Agent, Brea, CA
Sun Aug 7, 2011
Hi Dcher,
When buying a seller occupied short sale there are a couple of things to keep in mind. First, the seller is losing their home and will be netting nothing (with the possible HAFA $3,000 relo allowance) out of the transaction. Does the seller have a place to go and will they move out on time is a concern. Also, what will be the condition of the property after they move out. In a stanfard sale the seller has a financial incentive to leave the property on time and in good condition. I am not raising these issues to scare you but rather make you aware of potential issues. When writing a buyer's contract for a short sale, include that the seller will be out of the property before the walk through. Hope that helps
Web Reference:  http://ocnorth.com
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Doug & Bud Z…, Agent, Placerville, CA
Sat Aug 6, 2011
Probably not and your agent should help you evaluate the situation in coordination with the listing agent.
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Jack Gillis, Agent, Dallas, TX
Sat Aug 6, 2011
The one fact missing is who occupies the property, a tenant or owner? If it is the owner then no, as he will vacate at closing. If it is a tenant then, in most jurisdictions, you will buy the property subject to the terms of the existing tenant lease. In other words, if the tenant has 6 months left on his lease then you must honor his lease or negotiate an early termination.
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Shanna Rogers, Agent, Murrieta, CA
Sat Aug 6, 2011
Hi Dcheri60,

No. If the property is occupied, the property may actually be maintained better than if it is left vacant.

Shanna Rogers
SR Realty
http://www.RealtyBySR.com
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Sandra LaFla…, Agent, Sarasota, FL
Sat Aug 6, 2011
Dear Home Buyer,

Additional risk would take a little clarification from you. But many buyers with whom I work are seeing occupancy as an advantage because there is someone in there taking care of the place.

Through out the short sale process, my sellers have always allowed the buyers access into the listings I represent, and have expressed that at the beginning to help them feel their future real estate value is not harmed. It’s a very stressful time for everyone – so this is done with all politeness.

And, this level of access of course is verbal and non binding. What is binding is the contract you sign. You generally have one (1) inspection date. The price, terms and conditions -- of course vary with every deal. And a sales contract can look complex, but it consists of standard clauses that are individually easy to understand.

In the Florida As-Is contract our section "6. Occupancy and Possession: Unless otherwise stated herein, Seller shall at Closing, have removed all personal items and trash from the Property and shall deliver occupancy and possession, along with all keys, garage door openers, access devices and codes, as applicable to Buyer. If Property is intended to be rented or occupied beyond Closing, the fact and terms thereof and the tenants(s) or occupants shall be disclosed pursuant to STANDRARD D. If occupancy is to be delivered before Closing, Buyer assumes all risks of loss to Property from date of occupancy, shall be responsible and liable for maintenance from that date, and shall be deemed to have accepted Property in its existing condition as of time of taking occupancy."

So, on the day of closing (or escrow), if when you are doing your walkthrough and last inspection of the property -- before you sign your docs of course -- and if the property is not to the level you believed it to be when you authorized the contract -- then alert your real estate attorney and discuss the liabilities before doing anything.
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