When you are a tenant in a home, you pay your rent and expect that your landlord is paying the mortgage. Heck, it's spelled right out in the lease that both parties will do exactly that. Landlord pays mortgage, tenant pays rent.
What happens when the tenant is still paying rent, and the landlord has stopped paying the mortgage because they are attempting a Short Sale?
Ask the tenants and they'll tell you it's time to stop paying rent. That's not the best answer since the tenants did agree, in a signed document to pay the rent. In fact, I once represented a tenant that was in the process of buying a home. He'd stopped paying rent for this exact reason. His landlord wasn't paying the mortgage. Damn if he was going to let this guy take his money and run. Well, what happened was that the tenant/buyer's loan was rejected. It's funny how banks don't want to lend money to someone who doesn't want to pay their rent, no matter the reason.
Ask the landlord who is trying to conduct a Short Sale and he'll tell you that it is time to evict the tenants. Really? Let's think this through. If you are collecting rent and trying to be approved for a Short Sale on that property, do you really think holding on to that money is going to make your financial picture look more enticing for the bank to say, "Sure. We approve the Short Sale." In fact, most investors with tenants in properties that they are attempting to Short Sale will be shocked to know that the banks want to know exactly what you are doing with the rent if you are not paying the mortgage.
Either way you slice it, Short Sales that involve a landlord who is no longer making mortgage payments, and tenants that are expected to keep up with the rent is a song that played out in the Prince Wiliam County market and I'm ready to hear a new tune. I think the tune I prefer is one where a deal is worked out where the parties communicate openly, and honestly with one another. The landlord lets the tenants know they are in danger of being forcibly removed after a foreclosure because of missed mortgage payments. Perhaps the landlord cuts the tenants a break on the rent in exchange for living with a possible foreclosure hanging over their head. Or perhaps the tenants approach the landlord about making such a deal after the amount of registered mail coming to the rental property from the mortgage company has struck a chord of panic. Either way, it starts with being HONEST and COOPERATIVE. In my opinion, it's the only way to be.
Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155. To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com. Or you can visit her website: www.nvarealestate.net.
Header photos taken by Chris Ann Cleland.
The opinions expressed in this post are those of Chris Ann Cleland, not those of Long & Foster REALTORS®.