Tenant's offer rejected based on "arms length" transaction definition

have a short sale where ASC is the first trust.  The short sale property has been rented out and the tenant wants to buy it.  ASC is saying that they will not accept the offer from the tenant, as they consider it to not be an arms length transaction due to the "business relationship" that the lease creates.  has anyone else dealt with this?  I was not aware of this definition, and thought that a tenant could make the offer on a short sale.  thank you for comments.

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@Ron - everyone on this forum comes from different backgrounds:    You wrote "...Us lenders...than you are not an agent - you represent a bank, what bank?  So as a Lender YOU were a "victim of short sale fraud"? Very compelling stuff would love to learn more about this fraud case.

No, you never said you were an agent. I asked b/c I know better to assume everyone on this forum are agents. Your last post was a great read and I would like to hear more about this, but I needed to understand why you were filling out the form. 

This is important to me and generous of you to share.  For clarification: This suggests that there is some entity or Short Sale police checking year(s) later if Seller and Byer were in cahoots - the "arms-length" was fraudulent.

 

I doubt there is any "police" checking, but usually title won't close if they know the sale goes against the arm's length.

Jeff, well said.

And in the cases that you metioned, where a third party management company hanlded the lease and all communication, it by law would create and fully arms length business arrangement. They buyer has never met the seller, payments are indirect, management of the lease is by third party.....

Again, my main point with a holder saying "no" because of rental or lease, is that the holder decides the value at sale and is negotiating the instrument based on is HUD1 line, valuaing against the market ot begin with. Truly, the holder is in control and therefore thier is arms lengthe even if aunt Hilda purchases the property! No excuse that there is an arms length issue, unless the buyer works for the holder or servicer, period.

Does Lisa’s property have a NOD or NTS? The answer to this important, as it applies to what counsel to offer said tenant.

Short Sales Superstars learn about Tenant Rights as it applied in Short Sale - as well as a property in with a NOD and NTS.  

The foreclosure crisis has been devastating for many tenants. And although the PTFA (look it up) has been in place for more than three years, its implementation has been spotty. By knowing its provisions, agents can play an important role in preventing tenants from being precipitously, or illegally, forced from their homes.

Agents read up on the law, as the DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT has guidelines. Some state or local laws provide even more protections for tenants, so it is important to consult the applicable local law.

Here is a short list of places to start your education:

How did we go from can a tenant buy the home to........   preventing tenants from being precipitously, or illegally, forced from their homes.


Looks to be two separate issues

Good call Jeff you are right, separate issues.

I am a legal advocate for tenants stuck in middle of this mess. Just using this post to encourage the Superstars, if they are going to post something about it and/or be representing the Seller of a Short Sale property with Tenants  to learn about Tenant Rights.

Agents have posted many opinions regarding Lisa Jalufka question that I find great value in reading and hearing their position. Eye opening!

I think Jeff's point about NET is the most important to focus on. The Note Holder/Investors have a crappy asset and their goal is to stop their bleeding and salvage as much as they can.  Lisa did not state if Tenant's offer was FMV or if the NET was the amount they require, which I see to being valid thing to know.  Ron's position is the "law" is moot.  My position is: Someone with less talents as a litigator than Johnny Cochran, would easily and successfully argue that there is no "business relationship", as there is already case law that speaks to this.  After that reason is taken off the table :-) the folks at ASC will be free to use a brand new reason to reject tenants offer.

 

 

 

Jeff, good question but....

Interestingly, there is a definition of arms length included for tenancy in the referred documents. Therefore there is legal basis that a tenant is NOT an arms lenght issue unless they meet the included defintion(s) in that document.

As there is a legally defined arms length requirement of tenants, it is probably applicable to the holders/servicers in making determination as to arms  length in the purchase...you meet one then you meet both conditions as arms length.

As we are dealing with someone with property right to begin with, a violation of that legal definiution in law in making the determination could cause some real legal issues when the holder does sell in Short Sale, especially at a value at or near the tenant offer. Certainly any loss to the tenant with property right (contract for purchase) might be recoverable for failure to use existing definiion of "arms length" in tenancy and harming a party.

The real issue again, is that the holder/servicer controls the value on thier line of the HUD1. This is the negotiated value of the note involved. No lender/servicer is going to take $1 less than they can get, period. Therefore regardless of who they sell to, they will recive the same or substantially the same amount. Probably more from the tenant actually, because it saves the tenant thousands in moving expenses! They are willing to go as high as they need to within the appraisl and down pmt available.

I think this thread has gone off the rails a bit.  The short sale lender can deny a short sale for any reason they want.  The most common reasons (except for issues related to the Borrower/Seller) are unacceptable price/net proceeds and unacceptable buyer.  The Arm's Length issue is a buyer issue.  If you think there may be a law that prevents the bank from denying a short sale due to the buyer being a tenant in the house, or the Arm's Length Transaction Affidavit that the bank supplies is vague and you are not sure if it covers a tenant then you need to advise your seller client to seek legal counsel.

Way to sum it up Jim.

I have sold 4 short sales to tenants.  It would be in the language of the Arm's Length.

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