Short Sale with Uncooperative Tenants

[Solon S.]

Hey guys. So I'm seeing a lot of good deals in my area of $300-400K homes listed at half their price as short sales. The catch is that there are uncooperative tenants living in these properties that are refusing to leave (or pay rent). Being that it's NYC, reasonably priced houses are few and far in between, and these are steals if I can get them for $150-200K fix them up, and either flip them or rent them out. 

My question is whether these properties are worth the trouble of the eviction process or cash-for-keys. (Also, how much cash should be offered? $1,000 seems more than fair). I just wanted to get people's thoughts on this before I get myself knee deep in this.

Thanks

[Kyle J.]

Hi @Solon S.,

I've bought a few short sales and can offer a couple initial thoughts based on what you posted. 

First, if you are actually able to get a $400k house for $200k, then simply dealing with an uncooperative tenant shouldn't be a problem.  You can either offer them cash for keys, or go through a formal eviction process.  A $200k discount would easily justify and cover the cost of doing either option.

Second, since they're short sales, you'd not only need to get the seller to accept your offer but the lender would have to accept it as well.  And it's really only the lender's acceptance that matters since they're the one being shorted.  At some point in the process, the lender will have a BPO done to determine the approx value of the house.  And the reality is, unfortunately, that even if the seller accepted your offer of $200k, if the house is really worth $400k, there is no way the lender would accept it.  They're just not going to accept an offer for 50% of the home's value.