Can I Rent My Home After A Short Sale?
Generally speaking the answer is no. Once you miss enough payments for your lender to file a Notice of Default, you will be contacted by a bunch of different people and entities that promise “foreclosure help.” One of the offers you might receive goes something like this: An investor will buy your home as a short sale from the bank, you continue to live in the property and pay rent to the investor, after a number of years the investor will sell you your home back. Sound too good to be true? Well it is. I’m sure there are other details here and there, but this is the basic framework for the scheme and it has been going on for years.
Why is it a scheme instead of a smart tactic? Well because banks and investors are on the look out for this type of thing, and without full disclosure it is considered short sale fraud. Let’s be clear, if it is fully disclosed and accepted by the bank and investor — then it may be permissible. Trouble is, often it is not disclosed. And, most of the major banks, namely, Bank of America, Chase, and Wells Fargo have addendums and affidavits that they require the parties to sign which specifically prohibit this scenario. Now if you can get the bank to waive those conditions, great! But, if they won’t you’ve wasted a good part of your timeline to attain a short sale with this scheme.
Why should the bank care who buys the home? Well by applying for the short sale, you are asking the bank to take a loss. Part of their duty to the investor that they are servicing the loan for is to make sure that if the short sale is accepted that they are receiving market value for the home. Often, in this type of situation, the home is never actively marketed or offered for competitive bidding because the short sale seller only wants the investor to buy their home so they don’t have to move. The investor, of course, wants to obtain the home as cheaply as they possibly can, and since they have the owner in their back pocket they can often get an accepted contract at a pretty low value. If fully disclosed, this arrangement will raise a red flag to the short sale lender about the correct value of the property.
You may be tempted to turn a blind eye. Often these operations are unlicensed, but not always. So, many sellers think it acceptable to just “let them handle it.” However, it isn’t acceptable as surely the short sale seller will be assumed to be a party of the scheme, when it is easily shown that their address did not change and/or their name went back on public record for the property in a couple years. As such, in order to protect yourself from these accusation, you have to personally make sure that written disclosure is made to the lender and that they agree to those terms.
Before deciding whether to short sell your home, it is essential that you obtain legal and tax advice, and consult with an experienced local short sale agent. If you are considering a short sale of your Santa Maria, Orcutt, or Nipomo home and would like a short sale consultation, please call my office to schedule a meeting or a telephone consultation at (805) 938-9950.
Tni LeBlanc is an independent Real Estate Broker, Attorney, and Short Sale Agent. She is a Certified Distressed Property Expert (CDPE), Short Sale and Foreclosure Resource (SFR) and Certified HAFA Specialist (CHS) serving the Santa Maria, Orcutt and Five Cities area of the Central Coast of California.
* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement.
Copyright© 2012 Tni LeBlanc *Can I Rent My Home After A Short Sale*
