My buyers are renting a home that is in a short sale with a Trustee Sale posted: Here's my discussion with them.........
I have a really nice couple with 2 kids. They live in the San Fernando Valley area of Los Angeles. The husband's mother is going to be purchasing a home for them, with a conventional loan.
We already have a pre-approval with direct underwriting and are ready to go.
Here's the dilemma:
- The home they are renting is in a short sale, with a trustee sale scheduled for mid-February
- The landlord initially told them in December to forget about the rent, and they agreed to use the security deposit on hand as applied rent.
- The landlord afterwards, in January, gave them a 30 day notice to vacate (they have been living in the house for 2 years)
- The landlord, as of 2 days ago, has now given them a 3-day notice to quit.
- The landlord, at some point, informed them that the short sale of his home was an all-cash transaction, approximately $100k below list price.
Here was my advice to them:
First of all, I immediately forwarded them contact information for 2 Eviction Attorneys that I know of.
They clearly need to know what their rights are in this situation. In the state of California, if a tenant has been living in the home for 2 years, they are due a 60 day notice to vacate, not 30.
Secondly, in the state of California, the landlord can no longer use the security deposit as a form of rent towards the last month.
So it kind of seems that the landlord is flying by the seat of their pants on this one.
Also, something smells a little fishy here. I know the city they live in very well, and the market value of homes there. I don't really see where the bank, after doing an appraisal, are going to accept a purchase price that is $100k below market value, which currently would be in the mid $400k range, even if it is an all-cash offer.
Secondly, if it was an all-cash offer, why are they doing inspections and what appears to be retro-fitting standards to the property? An all-cash offer wouldn't have any of these lender-required type activities going on.
So of course, the properties I am now showing them are standard sales and REO's only. We do not have any time, unfortunately, to be making offers on short sales and be subject to any unknown waiting periods.
I also advised them to re-prioritize their wish list because we no longer have the luxury of time to make sure everything is on the list, especially in the price range that we can qualify for, which is mid $300k and below. They need a minimum of 3 bedrooms for their kids, so we are going to be really pressed to find something that will work in that range, in an area they feel comfortable in.
I am pounding the pavement every day to preview and check out any new listings and/or price changes that fall into our range to get them into contract ASAP. And my clients have really opened themselves up to different areas and have shifted their priorities around that have opened up more inventory for us.
In the meantime, I offered to have some dialogue with the listing agent on the property they are renting now. I figured if we all work together and communicate, we can make this all happen.
I did so, and told him that I am a certified short sale mitigator, and that I have an excellent track record with the particular bank that holds the mortgage on the property, and offered to help possibly get an extension on the closing date.
We had a few friendly email exchanges, but towards the end, he was a little more abrupt saying he cannot wait for my clients to close escrow on a purchase. Suffice it to say that was the last email I received before my clients received the 3-day notice to quit.
We'll see how this all rolls out. I'll keep everyone posted.
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