Buyer Short Sale Questions

[Darron Chadwick]

Thanks in advance I am new to bigger pockest and I am in the process of purchasing a Short sale home from B ( I think that is what the term is) A has moved out. We are supposed to close on june 10 but B has yet to get bank approval. We would like to rent from B until close assuming it is going to take longer then june 10 since our family is living in a hotel until close.Our realtor is hessitant to do this thinking that B will not be motivated in closing sooner. Could this be true? after all the reading im doing here it seems that B needs to close before bank forcloses.

[Scott Hubbard]

I have done deals with Suntrust and 6 months does not seem completely out of the norm. Suntrust is extremely slow and are backed up with a lot of short sales, however, they are a good company to work with once approval is obtained. So, in my opinion, the 6 months is not unusual.

I am going to take a different tact on the rental situation. I have done deals where renting from the "B" has turned out very well largely becuase of how it was structured. If you need to move and want the home, then I would say renting is not a problem. This is especially true since you are all cash. Here are some important points to remember if you so choose to rent prior to close.

1. Make the rents contingent upon successful sale. Have the rents go into an escrow account to be held upon successful close. The rents are to be refunded, in full or in part, should A or B fail to perform. The reason for this contingency is because it will cost you money to move out should they fail to perform and you should receive at least a partial refund.

2. Lease to be month to month with the deposit to be held into escrow and returned to you upon close or upon failure to close and move out. The deposits are there just to keep you from damaging the place. I doubt seriously that you are going to dmage a house you intend to live in. If they fail to close and you leave the place in similar condition, then you get a full refund. If you damage the home, they expense those repairs, delive the receipts to escrow, and escrow refunds the balance,if any.

3. Owner of record to grant "B' rights to enter into the agreement and proceeds from the rents to be waived unless "B" has an agreement stating otherwise. You do not want the rents to go to "B" if the "A" did not first agree to it. Personally, I believe all the rents shoudl go to "A", but a split may also be fair as well. In any event, you will want owner of record to agree to how the rent proceeds will be split.

4. There should also be a rider in the agreement that should "A" lender demand those rents, then title company is authorized to forward those payments directly to lender. This in case the lender, who has security interest in the property, demands proceeds from the rents and has an assignment of rents clause in the security agreement.

5. Make sure the property is insured and take out a renter's policy for your personal stuff.

Anytime you complicate a real estate deal, there is usually some financial toll upon the buyer. You should be prepared, both financially and emotionally, to leave the home should the deal fail.

In most cases, I find that these deals work best when you are in a spot where it is more expensive to stay in a hotel or a short-term rental.

Jon is right! Putting all your eggs into a single basket may turnout to have consequences. As long as you are prepared for the worst-case scenario, then I believe all else can be worked out.

Good Luck!