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 Enrique Vasquez-Plaza on June 27, 2011 at 5:05am

Hello!

 

Welcome to my world!  At least 20% of my sellers do this to me.  Dont forget he is under contract and he must comply.  HOWEVER, unless this is a million dollar home and he has tons of assests, you will be able to fight for your monies, otherwise, you have to play the dirty little game.

 

I had sellers that told me: "I rather get sue for something I dont know (money) than not save in rent for a couple of months..." That same seller made my life misserable, and I had no other option that understanding his situation and becoming his friend.  Sometimes your enemy has to be your friend, and I compromise to pay him 2K at close of escrow.  I rather make 6K  (originally 8K) instead of nothing...  And we can discuss all they long about getting it or not getting it done.

 

Well, I get them done that way...  Sometimes, they ned storage, relocation money, etc...  You have to talk to him and understand what his real need is.  Sometimes, they only need some money.  Their situation is complex, so sometimes, we -as agents- have to bring something to the table.

 

Good Luck my friend!

 

 

 

Permalink Reply by Enrique Vasquez-Plaza on June 27, 2011 at 5:07am

@ Catherine:   

"Again if a seller does not want to move read your Short Sale Advisory (California) or the Short Sale Addendum.  The seller has the right to cancel at any time.  Period " >>>>>>>>THIS IS 100% TRUE AND CORRECT BY THE WAY.  This is why I always negotiate.  I feed my family closing short sales, not just listing them.


Catherine Gheen said:

The bankruptcy court notifies all creditors of an active filing, this will include the short sale lender.  Again if a seller does not want to move read your Short Sale Advisory (California) or the Short Sale Addendum.  The seller has the right to cancel at any time.  Period>

 

Also I do not believe any judge would allow anyone to file a 3 day pay-or-quit, unlawful detainer, or any type of eviction proceedings as it violates the two California Civil Codes I mentioned earlier (1695 & 2495)  Read these codes they protect sellers in duress.

 

You can not force the seller from his home.  Walk away from the transaction.  To correct the earlier comment a seller can do a short sale after the bankruptcy is discharged and it does NOT re-affirm the debt.  Once it is discharged the bank would have to file a motion to re-open the bankruptcy case to prove to the judge why the debt should be re-affirmed.  Before SB 931 was passed I encouraged sellers to do a short sale after bankruptcy if they had a recourse loan.  I have never had my seller's be presented anything by the banks to re-affirm the debt.

 

There have been cases where people have stripped homes and the police have gone after them.  The lender may pursue them if they can locate them after the foreclosure, but I do not see that happening for some time if ever.  Banks are pretty overloaded with short sale requests.

Permalink Reply by Cliff Stanwick on June 27, 2011 at 6:16am

I had to have 4 approval letters rewritten due to a reconfirmation and reaffirmation of the debt from a clients in/out of BK. The short sale approval letter is a confirmation of the debt, and the execution is an affirmation. Be very careful should you have any acknowledgement of the debt signed by the Seller if he is in BK or even more importantly discharged from it. If you (or the Seller) agrees to the debt or any debt after the bankruptcy and you (or the Seller) did it  after the bankruptcy, it isn't a debt? 

 

Have your attorney add something like this to the letter:

 

"Servicer" acknowledges that "Borrower" may have filed for bankruptcy or may have received a discharge in a bankruptcy proceeding. "Servicer" further acknowledges and agrees this Agreement is NOT a reaffirmation agreement as defined in 11 U.S.C. 524, and that any references in this Agreement that imply liability under the Note obligation instead refer to the amounts secured by the property and is not meant to impart personal liability on "Borrower", and that this Agreement and communications related to this Agreement are not attempts to collect, assess or recover a claim against the "Borrower" that arose before the commencement of the bankruptcy or that has been discharged.

 

 

This is just a guideline by the way....

 

IMO, unless you are having an attorney review any and all approval letters for your client you may be exposing yourself to potential problems down the line.

Permalink Reply by Terry Price on June 27, 2011 at 7:31am
Let me comment for you on the "let him rent for a month or two' (or any amount of time): It's not illegal for a Seller to remain as the Buyer's tenant (in fact, it's likely illegal for a bank to tell a Buyer who they can and can't rent to) BUT Banks will NOT allow the Short Sale to progress via two overlay methods: The Arm's Length Agreement Affidavit and the Arm's Length Addendum. Both forbid Seller's from remaining as Tenants, Banks (particularly that bad ass bank, BOA) threatening to investigate after the shortsale and 'unwind' the sale if any prior existing Agreements exist. Violation amounts to the charge of purgery on the part of the Seller (new Tenant), Buyer, and Agent. Don't go there; it won't work.                                                                                                                                 
Permalink Reply by stanw on June 27, 2011 at 2:41pm

Hi everyone,


Thanks for all of the WONDERFUL advice! I am the buyer. Everything is set to close in a few weeks. Inspection has been done, I have signed all the escrow papers. However, he has not signed the documents, and I do not know if he will. My agent has been helpful, however, to complicate this situation, he is dealing with his wife being gravely ill, which is also affecting how much correspondence I have with him, as well as the time he may have to put into this SS. That is why I found this great site and am asking the questions here.

 

1. Just to clarify my understanding of everything: If the seller does not sign the escrow papers and all necessary documents before escrow is set to close and the house goes to foreclosure, I will have no recourse, right? The seller has the right to not sign the papers. Is this correct?

 

2. The seller did accept my offer initially and forwarded it to the bank so we had an agreement. If he is now no longer cooperating, what recourse do I have (assuming he was not bankrupt, which he is)?

 

Thank you.

Permalink Reply by Catherine Gheen on June 27, 2011 at 6:30pm

Stanw:

 

Yes, the seller can cancel at anytime.  The seller can not legally be evicted out of his home as he is the owner until a foreclosure occurrs.

 

The only option you have is to regain your deposit out of escrow and move on.

 

There are too many laws and civil codes on the side of the seller for you to win in court.  The seller's agent could also be dragged into further legal action if the seller wanted to start pointing fingers at all parties.

 

Now that you say his wife is gravely ill, this seller is NOT in their "Right" mind and any good attorney could have a field day with all of you.

 

I really doubt this seller will close on this transaction.  BE CAREFUL as to how the agents or you push this person to move out.  Again, walk away, if you end up in a lawsuit later you will really wish you had walked away.

 

Oftentimes when we are in the middle of things we can not see the repercussions later.  Just my two cents.  I'm off to file a complaint against a negotiator at Wells Fargo, it is my prayer to have this woman fired.

 

Blessings

Catherine

Permalink Reply by Michael Campus ABR,SFR,SRS on June 27, 2011 at 6:34pm

Remember, the only difference between a short sale and a normal sale is the lienholder approval, which is just a contingency to the purchase contract.  Your purchase contract delineates  your options should the other party default.

 

Easiest thing to do is walk away, (but insist seller as a matter of their default seller reimburses you for any expenses you had related to the purchase)  and your agent is also entitled to his commission if the seller defaults. Your agent should notify the sellers agent that he will be coming after both of them for his commission, and maybe the sellers agent can convince the seller his time has come to throw in the towel.

However,

If this is your dream home and you really , really want it, you can sue for specific performance.

 

Permalink Reply by Catherine Gheen on June 27, 2011 at 7:00pm

I am sorry but I strongly disagree.  You have not read fully the California Civil Codes that protect the seller.  How on earth can anyone threaten someone whose spouse is gravely ill to go after their commission.

 

The only thing that seller needs to do is file a DRE complaint and they will be all over this like white on rice.

 

Again, read the short sale information and advisory it states on their the seller has a right to cancel.  This verbiage can not be left up to real estate agents who are mad and want their commission.

 

If this end up in a legal action I would love to come watch to see what the judge says........................

 

Be careful of appearing to coerce someone in duress...............

 

 

Permalink Reply by stanw on June 27, 2011 at 9:14pm

Hi  Catherine,

 

It is my agent whose wife is gravely ill, not the seller.

 

Thanks.



Catherine Gheen said:

Stanw:

 

Yes, the seller can cancel at anytime.  The seller can not legally be evicted out of his home as he is the owner until a foreclosure occurrs.

 

The only option you have is to regain your deposit out of escrow and move on.

 

There are too many laws and civil codes on the side of the seller for you to win in court.  The seller's agent could also be dragged into further legal action if the seller wanted to start pointing fingers at all parties.

 

Now that you say his wife is gravely ill, this seller is NOT in their "Right" mind and any good attorney could have a field day with all of you.

 

I really doubt this seller will close on this transaction.  BE CAREFUL as to how the agents or you push this person to move out.  Again, walk away, if you end up in a lawsuit later you will really wish you had walked away.

 

Oftentimes when we are in the middle of things we can not see the repercussions later.  Just my two cents.  I'm off to file a complaint against a negotiator at Wells Fargo, it is my prayer to have this woman fired.

 

Blessings

Catherine

Permalink Reply by Linda Gregory on June 28, 2011 at 12:28am

Hi Stan,

 

I believe one of the folks who replied thought the Seller's wife is gravely ill-but if I read your post correctly, you are saying it's YOUR agent who is dealing with a very sad and consuming situation-I would ask your agent if his Broker might be able to step in and help or suggest a way to have some additional assistance in this complex transaction. Discuss your concerns with your agent. I am sure he is trying his best, but he is dealing with such a difficult situation, it is very sad.

stanw said:

Hi everyone,


Thanks for all of the WONDERFUL advice! I am the buyer. Everything is set to close in a few weeks. Inspection has been done, I have signed all the escrow papers. However, he has not signed the documents, and I do not know if he will. My agent has been helpful, however, to complicate this situation, he is dealing with his wife being gravely ill, which is also affecting how much correspondence I have with him, as well as the time he may have to put into this SS. That is why I found this great site and am asking the questions here.

 

1. Just to clarify my understanding of everything: If the seller does not sign the escrow papers and all necessary documents before escrow is set to close and the house goes to foreclosure, I will have no recourse, right? The seller has the right to not sign the papers. Is this correct?

 

2. The seller did accept my offer initially and forwarded it to the bank so we had an agreement. If he is now no longer cooperating, what recourse do I have (assuming he was not bankrupt, which he is)?

 

Thank you.

Permalink Reply by Enrique Vasquez-Plaza on June 28, 2011 at 5:57am

Catherine is RIGHT, seller has the right to cancel at anytime, due to his "vulnerable position" .  It really sucks for us agents, but it really makes sense or the distressed seller (despite the character)   Even if they get a mod offer, they can just opt out.  So despite they appear to be under contract, the disclosures (Short sale information Advisory) are clear, and they have the last word.

 

 

Permalink Reply by Mary Wilcox on July 7, 2011 at 1:41am

I'd move on.  Sounds more like he's a strategic default vs. a humbled, sincere short-saler.

Can't do much about that.

If you do toy with him further...renting to him, etc.  If I were the NEW owner, I would not choose him for a tenant.

If he's not paying now...who's to say he'd pay a landlord.  sheesh! (plus the arm's length may not allow it)

 

I'd lose this guy like a hot  potato!

 

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