Suggestions for dealing with current owner who does not want to leave?

I am set to close on a short sale next month. However, the current owner who is losing the house does not want to move out because he is living rent free and wants to continue doing so for as long as possible. He is threatening to let it go to foreclosure, in which case we lose the house. We proposed the idea of renting the house to him, though he has not responded and we do not think that he will want to do that either, since he has not had to pay on the house for two years and do not think he wants to start now.

 

1. Even if we work out some agreement for him to pay us rent for a month or two, what type of guarantee can we create that he will have to move out after the month or two is up? Any suggestions? Maybe have him put up some sort of collateral? Have any of you heard of anything like this before?

 

2. Any other suggestions for how to deal with this?

 

Thanks!

 

 

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Permalink Reply by DoesntMatter on June 23, 2011 at 4:38pm
Suggestion is to let the guy go to FCL. Hardheads like that dont care that the property goes to FCL, credit is not an issue, and he does not have to sell if he doesnt want to cooperate. Not to mention, he probably caught wind that these days the property goes to FCL, doesnt sell at auction, then basically he sits in the property free, until it sells.
Permalink Reply by stanw on June 23, 2011 at 5:09pm

He filed for bankruptcy last year.

 

1. Why would he start the process of a short sale if he had no intention of actually going through with it? What might his motivation have been?

 

2. If the house goes to FCL, are you saying that it will not go to auction? What happens after it is foreclosed on? I thought it went to auction? Do you have any info or links on this?

 

3. How might he be "using" me? By going through with a short sale, is it possible that it is stalling and letting him stay longer? What else might he be trying to pull?

 

Thanks guys!

Permalink Reply by Bryant Tutas on June 23, 2011 at 11:32pm
stanw. Assuming he goes through with the sale, as the new owner of the property, you can simply file for an eviction after closing. This should be a fairly straight forward procedure. Of course if the owner has no desire to move getting them to close on the transaction may be difficult. I think that is your bigger issue. Please seek legal advice. I am not an attorney.
Permalink Reply by Smitty on June 24, 2011 at 1:28am

I would not close on this property if he wants to stay.  I agree with Harry.  You need to move on.  If he is not ready to leave when you are ready to close, withdraw your contract.  You should NOT let him rent.  Even if you didn't sign an agreement stating you would not rent to him, it'slikely he will make things VERY difficult for you if you do.  I would never suggest that. 

 

If he included the house in the BK then there really is not a huge motivation for him to avoid the foreclosure.  They can't come after him for the deficiency. 

 

Harry is 100% right.  This guy is using you to milk staying in this home as long as he can.

Permalink Reply by Jeff Payne on June 24, 2011 at 1:36am
Alot of great advice here, Harry is right, this guy is playing you.  He probably knows that getting a short sale initiated could very well postpone the foreclosure and buy him even more rent free time.  He needs to cooperate or you need to move on. 
Permalink Reply by stanw on June 24, 2011 at 4:27am

1. He has bad credit due to the bankruptcy, though won't having his home go to foreclosure damage it more? What is the incentive for someone to do a short sale vs. letting their home go to foreclosure with regards to their credit?

 

2. How long does an eviction process take in California?

 

3. I would be willing to rent to him to prevent it going to foreclosure. I know that you guys recommend against, it though I would only do it as a last resort and I would want some sort of security in case he damages the home or doesn't move out when he says he will. Have you heard of a rent back type arrangement where some sort collateral is used, such as a car for the agreement?

 

Thanks everyone!!!!!

Permalink Reply by Jeff Payne on June 24, 2011 at 4:47am

Stanw, the sellers lender most likely will prohibit a rent back situation, might not fly if they know about it.  What makes you think he will pay you rent if he wont pay his mortgage? 

I would move forward cautiously, try to get it closed and then evict him.  If you get him to sign some sort of rentback, it might make it even harder to get him out.  At some point he will have to leave, either by you if you purchase the home or by the sheriff when the bank takes it back.

Permalink Reply by stanw on June 24, 2011 at 6:20am

I agree about him not likely paying a rentback since he will not pay his mortgage. That is why I am thinking about having him use collateral as part of the agreement.

 

1. Why would the sellers lender likely prohibit a rent back situation?

2. Why will a rentback make it harder to get him out?

 

Thanks.

Permalink Reply by Jeff Payne on June 24, 2011 at 6:27am
They tend to consider it fraudulent because it would be something that could be done to keep seller in home after short sale. Too easy to manipulate and they have rules against it. If he sings a lease it may be harder to evict than if he has no legal right to be there
Permalink Reply by DoesntMatter on June 24, 2011 at 11:38am

If the property goes to auction, and SELLS, buyer takes the property. If nobody buys it, it goes back to the lender to be sold as REO. For a H/O who has filed BK, the only incentive to SS would be to avoid having the FCL on record to go along with the BK. Yes, he may be using the SS as a stall tactic. I have seen H/O's initiate multiple SS's, only to have the H/O mysteriously cancel the SS in process, with no reason other than not wanting to pursue it anymore. The investor will factor in the amount of time delinquent compared to the chance for success, and this will not last long. 

 

Also, some H/O's are aware that if they try HAMP, the FCL date is auto postponed to allow time for review, unless they try and have already been denied. I've seen some clever H/O's. From what I've heard, once the property goes to FCL, they can basically live rent free until someone buys the property, then the authorities would physically remove them if they refuse to leave.

stanw said:

He filed for bankruptcy last year.

 

1. Why would he start the process of a short sale if he had no intention of actually going through with it? What might his motivation have been?

 

2. If the house goes to FCL, are you saying that it will not go to auction? What happens after it is foreclosed on? I thought it went to auction? Do you have any info or links on this?

 

3. How might he be "using" me? By going through with a short sale, is it possible that it is stalling and letting him stay longer? What else might he be trying to pull?

 

Thanks guys!

Permalink Reply by Bryant Tutas on June 25, 2011 at 11:31pm
I'm going to place this in the newsletter today to see what kind of responses we can get.
Permalink Reply by AstewartRealtor on June 25, 2011 at 11:55pm
I can understand why the buyers may be getting nervous. If he has not paid in mortgage, how likely is he to pay rent? My guess is not very.  While you may have worked hard on this deal; it may be prudent and more productive to find a back up property. In the event an agreement cannot be reached with the current owner/future squatter.  He has made his intentions known..consider it  a red " flair- warning"  that he will not abandon the ship until it sinks.

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