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Any luck with the bank agreeing to let the owners of short sale rent back from new owners?

Posted by debbie rumsey on January 11, 2010 at 12:08pm in Short Sale Discussions
I have a short sale that has been approved by the 1st, however, the owner wants to become the tenant and the NEW owner to be wants to rent to the sellers. The banks "Arm's Length Affidavit" specifically asks if there is any implied or written agreements for the owner to rent back. I will not sign it as I know it has been implied, however, can I strike the verbage that agrees to a rent back and have all parties initial and send back to the bank without the bank wanting to start the process over? Anyone heard of the bank agreeing to rent backs as long as there is no collusion, fraud or deceit involved? I'd be interested in your thoughts!

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  • Joshua Gamen December 22, 2010 at 7:31pm

     Interesting points here. As for the affidavit, what I wonder is, what would the banks seek for “damages” if they did persue goingafter someone who signed the affidavit but then rented back. Had they
    not signed the affidavit, would the bank have made more/lost less
    money? I certainly don’t think so. I am anxious for someone to force
    the issue and have it brought to courts. I don’t see banks finding
    out(A), and (B), if they did find out, would they really want to take
    it to court which could end up with a judgement not in their favor that
    could create a wave of strategic defaults for people to stay in their
    home for less money?

    I was pondering the idea and shot this vid with an attorney: https://www.youtube.com/watch?v=Nex_q-E7tO0

  • Paul Francis - Vegas Short Sales December 16, 2010 at 6:44pm

    I find that hilarious considering they had a program where they were allowing sellers that were foreclosed on to stay in the property as tenants.


    Kelly Dix said:

    Fannie Mae and Freddie Mac are starting to investigate these I've heard.  If you sign the arm's length affidavit that you are not renting it out and you will, that is considered fraud.  Why can't they just let people help each other??


    Jeffrey Smith said:

    Once the deal is closed, it's none of the bank's business what the new owners do with the property. I've had 2 shortsale deals where the seller has stayed and rented back his place from the new buyers.
  • Kelly Dix December 15, 2010 at 2:59pm

    It also states that there is no hidden agenda.  I think that covers everything else.  That's my problem right there!

    Bryant Tutas said:

    Jeffrey, Are you and the parties involved just ignoring the "arms length transaction" form that you MUST sign? If you are signing it you are agreeing that this will not happen. If you are not signing it the lender won't close. Signing it and ignoring it is fraud. So what's up?

    3131603266?profile=original


    Now of course this may not be the case with all lenders.
  • Kelly Dix December 15, 2010 at 2:55pm

    Fannie Mae and Freddie Mac are starting to investigate these I've heard.  If you sign the arm's length affidavit that you are not renting it out and you will, that is considered fraud.  Why can't they just let people help each other??


    Jeffrey Smith said:

    Once the deal is closed, it's none of the bank's business what the new owners do with the property. I've had 2 shortsale deals where the seller has stayed and rented back his place from the new buyers.
  • Jane Smith April 30, 2010 at 12:28am
    I have a question related to this topic. If the seller really want to rent back the property, but the buyer doesn't agree because not comfortable plus the Arm's length Transaction agreement, in this case, can the buyer buy more time for themselves by walking away the deal, post the property back to market and continue to enjoy the free living?
  • Sally K. & David L. Hanson February 1, 2010 at 7:09am
    Mot require an affavit of arm's length...have not seen one who does not BUT wording varies....and if seller stays as a tenant...but is not related to the buyer...is not getting any funds from the buyer, in some cases that is the only concern of the lender.
  • Eric Stevenson February 1, 2010 at 6:59am
    What bank was it? I would like to try to compile a list of which banks will allow them and which ones do not! Thanks.

    Sally K. & David L. Hanson said:
    Yes....one of our sellers is now happily the tenant at a short sale we closed...not a problem....the lender did not require any documentation as to family they were not....no collusion...just able to afford rent and not the mortgage and they all lived happily ever after.
  • Eric Stevenson February 1, 2010 at 6:53am
    In regards to which banks will allow them and which ones won't, I just started another discussion specifically on that subject. I was thinking it might be a nice place to post everbody's experiences about which banks will allow them and which will not. Just an easy reference point. Here is the link:

    http://www.shortsalesuperstars.com/forum/topics/short-sale-rent-ban...
  • Sally K. & David L. Hanson January 31, 2010 at 3:07am
    Yes....one of our sellers is now happily the tenant at a short sale we closed...not a problem....the lender did not require any documentation as to family they were not....no collusion...just able to afford rent and not the mortgage and they all lived happily ever after.
  • Eric Stevenson January 30, 2010 at 8:34am
    Thanks for the responses. And I totally agree, as a Realtor, I wouldn't want to sign that form knowing it wasn't true. Its too bad though, it seems like shortsale rentbacks could be a great solution for a lot of people. So do ALL banks require these affidavits, or is it hit and miss?
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