Lets say I buy a property in a short sale from someone I do not know. Once I own it, can I rent to the person that lost it?

Asked by Cooperdog, 55378 Sat Apr 16, 2011

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Angela Glaze’s answer
Angela Glaze, Agent, Waldorf, MD
Sat Apr 16, 2011
You can rent out a home that you bought to the previous owner .
Be advised to have a rental agreement in place.
A property that you want to rent out does not qualify for FHA.
You would have to buy with 20% down( as an investor )You have to pay the taxes..
Did you have somebody explaining ALL details to you ?
1 vote
Chris Block, , Saint Paul, MN
Tue Apr 26, 2011
Fraud and I have no idea what the heck these other people are thinking when they tell you otherwise.

Sure, the enforcement issue is a different topic but the Short Sale will make it illegal.
0 votes
Shane Willis, Agent, Pensacola, FL
Sat Apr 16, 2011
A good short sale agent will have you sign and Arms length transaction form which states the sellers are out of the situation all together. What you are contemplating is considered fraud and I would avoid it.
0 votes
Donald James, Agent, Edina, MN
Sat Apr 16, 2011
Good answers all. If this is indeed a rentable property why limit yourself to the former owner (at a long arms length). For my rental properties Craig's list brings me a large supply of good tenants. You have two ways of making money on this deal: 1) buy it right and save money on the purchase and 2) rent it out to a solid, well-qualified renter (the previous owner may not be) and have them make the mortgage payments for you.
0 votes
Steele V. Pr…, , Minneapolis, MN
Sat Apr 16, 2011
Most lenders will have a clause in the agreement with the seller that this be an arm's length transaction. Part of the that is an agreement that the former owner is completely out of the situation once completed. I wouldn't rent it to a former owner if I were you. You both could be charged with fraud. Doesn't matter if you didn't know them at first.

My experience and opinion, of course.

Remember the old Clint Eastwood chararcter of Dirty Harry.

"Do you feel lucky?"
0 votes
Cameron Piper, Agent, Forest Lake, MN
Sat Apr 16, 2011
It depends on the bank what type of Arms Length Transaction document they use. Wells Fargo Home Mortgage (1st mortgages) recently updated their forms and this sort if arrangent would not be allowed under the language of the document. Google Wells Fargo Contract Addendum and read for yourself.

Enforcement is a whole other issue that can be argued, but for now suffice it to say the banks wouldn't be happy with this arrangement.

Cameron Piper
Coldwell Banker Burnet
Web Reference:  http://www.campiper.com
0 votes
Deborah Davi…, Agent, North Bethesda, MD
Sat Apr 16, 2011
You should be fine doing a rental with a former owner of a short sale. At closing the you and the seller will be required to sign a document stating that the transaction is
0 votes
Bill Eckler, Agent, Venice, FL
Sat Apr 16, 2011

Rent possibly...........lease option, don't go there!

The lenders are requiring "arms length" relationships because they don't want to see the original owners in any way associated with the ownership of the property.

0 votes
Steven Neuman, Agent, Plymouth, MN
Sat Apr 16, 2011
Absolutely! As long as this is an "arm's length transaction", and you are not related to the seller in any way, you should be fine.
0 votes
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