Short Sale Questions: What if there are tenants in the property?
There is no law about tenants. The homeowner owns the home up to the time you sell it or it gets foreclosed on and sold at the sheriffs auction. The lease with the tenant is in force until the contract expires, or ownership is transfered. They are obligated to pay rent regardless of your mortgage being paid, that is none of the tenants business legally.
But it does become a problem at some point if they refuse to pay rent. Then they will have to be evicted.
They will become aware at some point what is transpiring.
Here is the timeline:
The property owner misses 3 payments and becomes 90 days past due.
At this time, the account gets transfered to the loss mitigation department of the lender. In most cases the phone calls from collections (customer service) slow down or stop all together.
The lender contacts an attorney and starts to sue for foreclosure. A Lis Pendens is filed with the courts. Lis pendens is Latin for "suit pending."
It is important to notify your Realtor that the foreclosure clock has started. The attorney will not stop or slow down until the property is sold, or the bank instructs them a sale is imminant. Just because there is an offer, the attorney's office is not notified. This time line has to be watched closely as the short sale department will not communicate with the attorney in most cases. The attorney is working independently of the short sale department. The bank has hired them to foreclose and they want to get paid. Many times the foreclosure with the courts happens and a short sale is being negotiated, but the Realtor is not paying attention to the timeline. Foreclosure could have been delayed, or stopped to allow the negotiation to continue. I have delayed many sheriff sales, but it has to be a compelling reason for the negotiator to do so.
I just finished a short sale that had been going on for 3 years. I delayed the sheriff's sale four times. But in other cases, I have been denied. The circumstances are different everytime. Who actually owns the note, the compitency of the negotiator, and how they feel about the negotiation. How they feel has a lot to do with, are their requests being handled in a timely manner. When they ask for documents, are they getting them quickly, or is it taking a week or two. They have a large workload and the negotiator looses interest if there are large delays in getting documents updated. That is the reason I require my sellers to funish so much information in the beginning. I want the packet as complete as possible so when the offer finally gets assigned to a negotiator, it is complete. Getting an offer assigned to a negotiator takes time, months in most cases. It first goes into a department that makes sure that all documents are present and up to date. Updated bank Statements and pay stups are requested often so the negotiator is aware of any and all financial changes if they occur. When I am asked to submit updates, I need your help in getting them in a timely fassion please.
Back to the renters. In most cases I pass if there are renters. They get in the way of showing the property. When the Lis Pendens is filed. You will get the notice mailed to you, but the county will hand deliver it to the property. Your tenants will also get it. They sometimes move at this point, They stop paying rent. (illegally), Or they get angry that they have been put in this possition. They sometimes become unreasonable and will not show the property as they feel it's time to get theirs. "Hey, the landlord is in foreclosure and we can live here for free as they are not paying their martgage."
With tenants in the home, most Realtors will not try to hard to get an appointment and take their buyers elsewhere. As I have explained, tenants can be a real problem.
I hope this helps answer your question about your tenants and what might transpire.
Sometimes, the short sale is denied as the home is not the primary residence at the time.
For answers to more questions you may have, contact Mark At ResidentTeamRealty@yahoo.com, www.Residentteam.com, or phone 407-301-0312.
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