Can I Sell My Home in a Short Sale to an Investor and Rent It Back?

This is a very good post.  This simply cannot be done.  I think that this is good information for those who are looking at doing something like this.  It cannot be done.

Hello Chris Ann,  What a great blog, I have had people ask me that question also. 

Chris Ann, that arrangement was a huge scam during the last short sale market in the early 1990s in CA.  The investor and the owner and maybe the listing agent arrange a below market sale price (thereby cheating the lender) in exchange for a very long term rent back--like 3-5 years.  The seller loves it, the investor loves it, but the lender gets scr*wed.  I'm sure people are still trying to do that.

Interesting question!  Why would the house not be able to be sold to anyone who wants to buy it, relative or not?

So many people mistakenly believe that they can do this.  One woman kept insisting that she could and when I politely refused to help her she became very abusive.  I RAN from that one!

Most of the banks I work with have an addendum for the seller to sign that they will not be living in the home after closing. i have had one that would not close until the home was vacant. owners who choose to find investors like this have false hope they can save their home, This thought extends the pain and hurt instead of allowing them a clean break and new start.

Yes, Chris Ann, I just discovered it for myself that there is a new supplemental to the HAFA regulations, as long as it's not a GSE.

What many people don't understand is that a "short sale" is, in fact, a mortgage loan modification... in and of itself..

It is modifying the terms of an existing mortgage. (i.e. reduced principal/interest and forgiven fees/penalties (if applicable).)

And, just like when obtaining a mortgage loan, they must complete an application, they are required to provide supporting documentation, and they must be approved by the investors who own the loan.

And, when they sign the "Arm's Length Transaction Affidavit", they are swearing, under penalty of law, that the home is being sold to an unrelated, uninvolved third party.

And, if any under the table dealings go on... It is, in fact, "Mortgage Fraud".. punishable by prison and huge fines...

And, if a real estate professional participates in any way... they can kiss thier license good bye.

It's not worth the risk.

Chris Ann, doesn't make sense but for the most part, sellers do have to move out. Except for HAFA like Elizabeth pointed out, I believe the investor has to be for non for profit organization.

Chris Ann, it's too bad that the Arms length transaction can't just be eliminated as it would likely help a lot of distressed homeowners however, I guess the Lender who is losing money isn't interested in helping the borrower.

It's the proverbial having your cake and eating it too.  Can't do both.  Although a normal loan mod is basically that.  Those are much harder to get through then short sales though, right?  I guess it does have something to do with the banks wanting to punish the owner a bit?

Agent education is key. I previously worked with a agent that insisted on ignoring that clause in the bank addendum. She willingly told the seller and buyers to ignore that line and the lienholder will never know. Once that statement was made, it was time for me to exit. The assumption by some is that short sales are like traditional sales and when you add an agent into the transaction that is careless and do not have the short sale knowledge/training, it makes for a dangerous situation.