Renting the home we are in escrow with?

Asked by Jmb, Roseville, CA Mon Jul 2, 2012

We are currently buying a short sale property, we were to close 2 weeks ago until we were notified that there was a second mortgage and needed another bank approval. It took the first bank 3 months to approve the short sale on the 1st mortgage. We now have 5 days to be out of our current home! Can we "rent" our new home before we own it? 

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Teri Andrews…, Agent, Auburn, CA
Tue Jul 3, 2012
I have had a buyer move in to the home that they were purchasing, it was a short sale and the seller had already moved out. They did sign a occupancy agreement, that also spelled out they would have to vacate within 2 days if short sale did not close.

There is risk to you and the seller. For example what if the 2nd mortgage does not approve the sale, then what?

Work with your agent and see what solutions are available to you and the possible risks.
1 vote
Jmb, Home Buyer, Roseville, CA
Mon Jul 2, 2012
Thank you greatly for your answers. Yes we are with agents; we have been told it was the sellers agents responsibility to order the payoff for the second mortgage. We can not get in contact with the escrow  officer, all we keep getting is assistants. The first mortgage approval has not expired yet, we still have 3 weeks on that. We have just been notified the short sale is applied to the sellers second mortgage. We have already extended our lease of our current home (rental), but no longer can extend due to our landlords contract with a property management company to rent out our rental. Therefore the ultimate question if we could move into the vacant home we are currently in escrow with. 
Thank you again for the responses, we can use all the help we can get!
1 vote
Myron Butler, Agent, Sacramento, CA
Mon Jul 2, 2012
Is there a sale date on the property? Is that why you have to be out in 5 days? If so, you should ask your agent if the listing agent has requested a postponement of the sale date yet. What's the status of the 2nd lender? It's been 2 weeks now since they've had the 1st lender's approval. They typically are able to arrive at at decision quickly once an approval has been issued by the 1st lender. As for renting, you're asking if you can rent from the lender, right? Your agent would need to discuss this with the listing agent and see if the list agent has any rapport with the bank/negotiator to even consider that. Typically the sale date (aka foreclosure sale date) can be postponed up until the day it's scheduled to go to auction. They usually will postpone it with a valid offer submitted along with proof of funds for down payment or cash and a loan pre-approval. Most banks won't postpone the sale date until 2 or 3 days prior to the sale date.
0 votes
Aaron Pfeffer, Agent, Los Angeles, CA
Mon Jul 2, 2012
It's always disheartening to hear something like this, as it means so many people dropped the ball, and that's really unfair to you. Uta makes some fantastic points about the lien (mortgage) negotiations, so someone in your camp should really be explaining in depth how much longer this might realistically take and the exact steps that will need to be taken.

To actually answer your question though...yes it is possible...but proceed with extreme caution. Not knowing the specifics of your rental agreement conversations means that we're speaking vaguely here, but be very wary of tying rental deposits into the ultimate purchase. Uta also makes a strong point about us not being able to give too much advice (so as not to overstep bounds).

Best of luck...
0 votes
Ute Ferdig, Agent, Newcastle, CA
Mon Jul 2, 2012
Hello Jmeowerz. I am sorry you have encountered this unfortunate turn of events. I am not sure how the existence of a second mortgage could have gone unnoticed for so long. I can't say that I have ever not known how many loans I had to negotiate.

As far as your question is concerned. I personally am not a fan of early occupancy, but your situation is unique. I am assuming you gave notice on your current residence in reliance on being able to close escrow on your new home, and the only reason why you are not able to close is because of the delayed discovery of the second mortgage. I am also assuming that you are represented by a real estate agent, which makes it inappropriate for me to suggest a solution other than that your agent's broker should contact the listing agent's broker and find a solution and work this out. There is no way of predicting how long it will take to secure the approval from the second mortgage. There is not even certainty that it will happen at all. The way I see it, having this second mortgage to deal with also means that the approval with the first will have to be renegotiated unless a third party will pay what it takes to get approval from the second mortgage. Even if the payoff to the first will remain the same, the first will still need to re-approve because the estimated closing statement on which the first approval was based will have to be revised to reflect the payoff to the second mortgage.

What does your agent have to say about all of this?

Good luck with that.

Ute Ferdig
0 votes
Jim Walker, Agent, Carmichael, CA
Mon Jul 2, 2012
What? Did you ask your agent? Do please tell us what your agent said.
And WHAT?? NO ONE, not the listing agent, not the title company, nor the seller could have disclosed this earlier? What??? do you have other threads working on this story?
0 votes
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