There is discussion on Active Rain from time to time on whether in a short sale it is advisable to move out of the house.
The real issue is the clause in the mortgage that says the bank can change the locks on the house if it is "abandoned". The exact phrase from the Fannie Mae Single Family mortgage form says,
9. Protection of Lender's Interest in the Property and Rights Under this Security Instrument. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender's interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien which may attain priority over this Security Instrument or to enforce laws or regulations), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property. Lender's actions can include, but are not limited to: (a) paying any sums secured by a lien which has priority over this Security Instrument; (b) appearing in court; and (c) paying reasonable attorneys' fees to protect its interest in the Property and/or rights under this Security Instrument, including its secured position in a bankruptcy proceeding. Securing the Property includes, but is not limited to, entering the Property to make repairs, change locks, replace or board up doors and windows, drain water from pipes, eliminate building or other code violations or dangerous conditions, and have utilities turned on or off. Although Lender may take action under this Section 9, Lender does not have to do so and is not under any duty or obligation to do so. It is agreed that Lender incurs no liability for not taking any or all actions authorized under this Section 9.
My office has had only one experience on the changing of locks - and it was before the lender foreclosed and to change the locks the lender sawed off the realtor's lock box!
Frankly, the most liberal reading in favor of the banks would allow the bank to change the locks and shut off the utilities even while the borrower was in the house. I think there is no chance of that occurring - at least if it did the judge would be real upset with the lender.
As protection from this clause causing the remote chance of a change of locks, the best practice is to have a tenant in a vacant residence being (or planned to be) negotiated for short sale. I also advise my clients to continue to pay HOA or Condo fees, as those liens can have an adverse affect upon the lien of the lender (see subparagraph (a) above).
Let me know of your client's experiences with this issue!
UPDATE - THE SOLUTION TO THIS MATTER IS TO CALL THE LENDER AND LET THEM KNOW THE HOME IS NOT ABANDONED AND YOU HAVE AN ACTIVE LISTING AND ARE CARING FOR THE PROPERTY AND SHOWING THE PROPERTY. THEY WILL EITHER GIVE YOU THE CODE FOR THEIR LOCK BOX OR SEND YOU THE KEY TO THE NEW LOCK.
Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@FLORIDA-COUNSEL.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com