Can tenant purchase condo they are living in through short sale?

My client is renting a condo at a  negative amount so each month he has to put in extra money to cover the mortgage. He was hoping for the market to come back so he could sell in a year or two. Now he lost his job and is moving from NJ to Minnesota for a new job where he will be making half the income. His tenant is interested in purchasing the condo as a short sale.

Would this be considered an arm's length transaction?  Any other potential problems the SS Superstars can foresee?  

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Permalink Reply by Stephen Shafer on June 2, 2011 at 8:14am
Yes as there is no other relation ship and if the seller has a hardship.All depends on the lender and investor.
Permalink Reply by Bryant Tutas on June 5, 2011 at 12:46am
It will depend on how the Arms Length Transaction Affidavit is worded. Most lenders will have an issue with this but not all.
Permalink Reply by Keith Canty on June 5, 2011 at 2:11am
I have not had a problem with this type transaction and have found that tenant buyers is probably the best way to sell a condo in this area.
Permalink Reply by Nate Gerard on June 5, 2011 at 2:41am

I had a tenant buy the home from her landlord with Wells (who uses some stringent arms length docs). It went very well and closed. The owner was already behind on payments. Not sure if your owner is already 30+ days past due already but loss of job and forced relocation are typically qualified hardships.

 

If your client is moving to the Twin Cities, I'm happy to help them get set up with a Rental, Rent to Own, or Contract for Deed.

 

Good Luck,

 

Nate

www.NateGerard.com

Permalink Reply by Annette Whitehead on June 5, 2011 at 2:44am
Yes, just make sure you disclose this & that the tenant isn't related to the seller.
Permalink Reply by Kimberley Kelly on June 5, 2011 at 3:22am
I don't see a problem with this as he's not related by family, BUT as Bryant says, some of the Arms Length mention Business Connections..and that could be cloudy here.  Be careful.
Permalink Reply by Mike Netzel on June 5, 2011 at 3:25am

In todays market, what you describe is a perfectly logical lead generation approach!

The entire conversations of finding the buyer falls silent! We have one closing next week.

Sometimes the reality of it being a BFO (Blinding Flash of the Obvious)...is amazing!

We call that "Win - Win! Well done.

Permalink Reply by Rita Legan CDPE (440) 227-4461 on June 5, 2011 at 3:53am
Just had one close where tenant was buying property. When the seller came to me he already had a NOD from Bank Of America. You would think BOA would of wanted the monthly rent but they did not. BOA asked us to write up an arms length agreement stating there was no other relationship except landlord tenant. This was a prior FHA so it was not on Equator. It took a long time so we finally got it escalated to manager of FHA Short Sales. Stay on top of it because I think initially ours just sat because negotiator had never had one like this.
Permalink Reply by chris dodson on June 5, 2011 at 4:26am

I recently closed a Wells Fargo short sale with my buyer as the tenant. No problems. All the arm's length aggreement is interested in is that no one may be related to by blood or family in-law, or in a business affillation. The fear is that one of the parties (seller or buyer)  will do the other a favor by discounting the sale price for personal gain.

The Arm's Length Aggreement, however, in my opinion is somewhat vague and easy to manuever around if one wants to be creative enough.

Permalink Reply by Napua Lucas on June 5, 2011 at 5:00am
I have received some Arms Length Transaction Affidavits that specifically state no business relationships etc. and therefore would consider landlord/tenant to be a business relationship.  However, I would also contact the short sale lien holder and ask them for their approval and get it in writing because they seem to forget or someone gives information out that could be misinformation.    Disclose the information in the contract.
Permalink Reply by Isabelle Javier on June 5, 2011 at 9:19am

 

Hi James. One of my present short sale transactions is the tenant buying the house from the landlord. It was disclosed and the At Arm's Length document was signed by all parties and provided to both the 1st and 2nd lien holders. We even added the Buyer's address on the HUD, which was obviously the property in question. Both Chase as a first, and Bank of America as a second, aproved it. What a piece of cake this transaction was compared to so many others. So go for it, I'm pretty certain you'll be fine. Isabelle

Permalink Reply by Kathleen Couch on June 5, 2011 at 11:22am
I have not run into a problem of "arms length" with a tenant buying the property.  The main thing "arms length" is designed for, is so there is no way the present homeowner can financially gain from selling the home as a short sale.  I just had one approved that the tenant bought the townhouse.

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