This isn't just for properties being foreclosed but for any properties for sale that are tenant-occupied.

As buyer's agent, we can insist as a condition of purchase, that the property is delivered vacant, and that the seller provide proof that notice to vacate at a certain date has been properly delivered to the tenants. If sellers refuse, then it's up to the buyer to decide whether to proceed with the purchase or find something else.

As listing agents, we should advise the sellers to make sure the tenants are aware of the possibility that the next owners may want to have the property delivered vacant.

Via Anna 'Banana' Kruchten - Phoenix Short Sale Broker,CRS 602-380-4886 (Phoenix Property Shoppe):

Investors Beware When Buying Properties That Are Tenant Occupied


In 2009 the US Congress enacted the 'Protecting Tenants at Foreclosure Act. Basically the PTFA Act offered tenants protection of not being evicted in the case of a foreclosure.  There are four qualifications that need to met in order for the tenant to keep possession of the property after a foreclosure by the landlords creditor.  

  1. The defaulting borrower can not be the same person as the tenantInvestor Beware of Buying Homes with Tenants
  2. The lease must be an 'arms length' agreement
  3. The lease must require 'fair market rent'
  4. The lease must have been executed prior to the notice of trustee sale
 
Until recently the 'notice of trustee sale meant was understood to mean the 90 day notice the lender is required to provide the borrower before proceeding with the foreclosure. Basically that meant the tenant must have signed the lease at least 90 day before the trustee sale.
 
 
Here's where it could become a big game changer for investors... according to the The Dodd Frank Act the 90 day notice requirement has been eliminated in Section 1414(1) (B).  The tenant must only show that the lease was entered into anytime before title transfers from the original borrower to a 'a successor entity or person' at the trustee sale.
 

So what does this mean for Investors buying property?  The defaulting borrower could enter into a lease with a new tenant the morning of the trustee sale thus requiring the new owner to honor the lease following the foreclosure. This means the new owner could be stuck with with renting the property for the remainder of the lease term. 

 

Investors Beware When Buying Properties That Are Tenant Occupied
 


*******************************************************  

 

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I take my clients trust in me very seriously. I'm known for 'telling' it like it is, not what folks might want to hear or  think it should look like. Now that may sound kind of tough, but think about it, in the long run if you want to buy or sell a home you need to know the real facts in order to make a wise choice.


If you want the truth and the whole truth, I am the 
Phoenix Real Estate Broker for You.


When you are ready to buy or sell a Phoenix Area Home, I will be your advocate, guide, and fierce negotiator. I will work hard to make your buying or selling a home as smooth and stress-free as I possibly can - even if it's a short sale.  Guaranteed.

 


Call me and we'll create a plan of action to buy a home or sell your home! 

 

Sincerely,

 

Anna 'Banana' Kruchten

Broker/Owner

602-380-4886 

 

                                   

 
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8 Comments on Investors Beware When Buying Properties That Are Tenant Occupied

APR
28
2012
709,601 Points 48 Featured Posts Localism Sponsor Outside Blog Called Shot Master

This is truly a great re-blog, many hurdles for investors to be aware of!
12:29pm • #1
875,418 Points Outside Blog Called Shot Master

Pacita - I have learned that there are some investors experiencing difficulties with tenants after buying properties with tenants occupied.
1:58pm • #2
617,693 Points 60 Featured Posts Localism Sponsor Outside Blog Hit Router Attended Rain Camp Called Shot Master

Endre --- I'm always concerned when tenants occupy the place because of horror stories about tenants refusing to budge, and waiting for cash for keys

John --- If the tenants are in rent-controlled areas, it's a huge problem...that's why it's important to deliver the property vacant. Let the investor get their own tenants. Less trouble that way.

3:24pm • #3
859,692 Points 8 Featured Posts Outside Blog Called Shot Master

Pacita, last year I sold a short sale to my investor buyer that had a tenant and everything went well because the tenant signed a new lease with my buyer. It doesn't happen very often, but it's nice when it does because there is no vacancy period. :)

Leilani
10:54pm • #4
APR
29
2012
230,369 Points 9 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

I think Leilani has a great point.  Communication is the key and if everyone works together things can go smoothly.  Unfortunately most transactions usually exclude the tenant from most of the communication and can result in mistrust and problems in getting the tenant to move.
12:54am • #5
194,115 Points 1 Featured Post Outside Blog

Pacita, there are so many gotchas with buying tenant occupied property in San Francisco because of the rent control laws. As long as tenants are paying rent and beeing good tentnats, there is literally no way to evist them unless the property will be taken off the rental market and then it has to stay off. Owner move in evictions? Each tenant must receive $5000+ and additional $$ if children or elderly are involved. Way too much trouble...
11:14am • #6
617,693 Points 60 Featured Posts Localism Sponsor Outside Blog Hit Router Attended Rain Camp Called Shot Master

Leilani -- glad it worked out for you

Doug -- it's great if the buyers want to keep the tenants, if the rents are market value.

John -- San Francisco Berkeley and Oakland are nightmarish for landlords because of rent control. I remember wanting to sublet an apartment in San Francisco. the building had 10 tenants, only 3 of them were currently rented and occupied The owner wanted to do a condo conversion, but he had tenant hold-outs. Makes me wonder why anyone would want to buy an apartment building and have to grapple with these landlord tenant issues in these cities.
11:55am • #7
329,646 Points 6 Featured Posts Hit Router Attended Rain Camp Called Shot Master

Most likely? Definitely an investor is stuck with the lease. That's why if you are renting and you are selling, do not renew the lease and keep them month to month. Also, if you are trying to get rent until short sale closes, just need to be sure it is a 30 day agreement or month to month. At least in CA.
11:07pm • #8

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Pacita Dimacali - ePRO, SRES, CDPE, MBA Alain Pinel in Alameda County CA

Oakland, CA

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