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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@Harry Clay - I think this is absolutely the most recent trend....  Sellers who have such strong emotional attachment to the property and such disdain for the lender who they believe "did them wrong" they will not leave no matter what.  I had a listing and in the seller's ongoing updated hardship letters to the lender, the seller actually wrote (and signed it) they would "gut the property and burn it down before they would let it be taken in foreclosure"....  And, "they will have to shoot me and carry me out of here"

Desperate People are doing Desperate things.....

IMHO, we are in for an even deeper housing recession over the next several years.  In Newport Beach, our market has completely flattened-out - Year over Year sales are exactly the same - but prices are deeply lower, which means less money in the economy, less commissions for REALTORS, less spendable money for sellers and those involved in our industry.

Rent rates in Orange County are increasing every month and occupancy rates have increased to above 98%.  A vacancy rate of only 2% bolsters the justification for rent increases.

There is also another part of the ongoing story - that is - the people who shorted, lost their homes or BK'd, 2+ years ago are now back on good financial footing.  They have adjusted their spending habits and learned to live on smaller budgets which is a good thing.  BUT, these "adjusted" folks will rent for a longer segment of their lives until the housing economy turns around in another 5 - 7 years.  Many former homeowners have no desire to own any longer and prefer renting and leaving all of the maintenance issues, headaches, and costs to the landlord.

 

I think we are in for at least another 5 years of the same housing market with additional deep valleys and very few peaks (or just minor hills) along the way.

 

Just my .02

 

Thom Colby

Broker

Newport Beach CA

 

@Thom - I agree and I think we are in for more at least in CA for sure.

Thom Colby Newport Beach CA said:

@Harry Clay - I think this is absolutely the most recent trend....  Sellers who have such strong emotional attachment to the property and such disdain for the lender who they believe "did them wrong" they will not leave no matter what.  I had a listing and in the seller's ongoing updated hardship letters to the lender, the seller actually wrote (and signed it) they would "gut the property and burn it down before they would let it be taken in foreclosure"....  And, "they will have to shoot me and carry me out of here"

Desperate People are doing Desperate things.....

IMHO, we are in for an even deeper housing recession over the next several years.  In Newport Beach, our market has completely flattened-out - Year over Year sales are exactly the same - but prices are deeply lower, which means less money in the economy, less commissions for REALTORS, less spendable money for sellers and those involved in our industry.

Rent rates in Orange County are increasing every month and occupancy rates have increased to above 98%.  A vacancy rate of only 2% bolsters the justification for rent increases.

There is also another part of the ongoing story - that is - the people who shorted, lost their homes or BK'd, 2+ years ago are now back on good financial footing.  They have adjusted their spending habits and learned to live on smaller budgets which is a good thing.  BUT, these "adjusted" folks will rent for a longer segment of their lives until the housing economy turns around in another 5 - 7 years.  Many former homeowners have no desire to own any longer and prefer renting and leaving all of the maintenance issues, headaches, and costs to the landlord.

 

I think we are in for at least another 5 years of the same housing market with additional deep valleys and very few peaks (or just minor hills) along the way.

 

Just my .02

 

Thom Colby

Broker

Newport Beach CA

 



stanw said:

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!!!!!

Run don't walk away from this deal.  An uncooperative seller now means trouble later.  I would not advise my client to close on this deal and most lenders shy away from problem properties.  Go find another home to buy!

There are a couple of things I can suggest. First I agree that you should walk away, really there are so many good deals out there right now, it really isn't worth it to entertain this guy. But if you must, then an unlawful detainer, not renting it to him would be the way to go. You would need to serve a 3 day notice to quit then an unlawful detainer can be filed, in CA this action moves very quickly. For information on this look at http://www.tenantslegalcenter.com/index.html click on the landlord tenant law sheet on the left side, and also read the eviction section so you can see the difference. This is if you get him to go through with the short sale. Once you are the owner you have more rights.

 

You really don't want a person like this living in a home you are trying to buy, or you own, he can rip out everything worth anything and sell it, and you really would have a problem on your hands trying to get him to pay for it considering he is insolvent.

 

Consider offering him cash for keys, seems to work for the banks! Whatever you end up doing, get it in writing and make sure he signs it! Think about offering to help him find a new place to live, I like to use craigslist. Then offer to pay for movers to come move him, plus maybe cash for keys. This would be cheaper then replacing all the appliances, and anything else he is likely to rip out if you let him stay.

 

Good luck!

 

I am not sure of your terminology " I am set to close on a short sale next month." Does that mean you have an agreement notice from the sellers listing agent that the sellers lender has approved the short sale and the seller has agreed to it. That would mean you have opened escrow, began inspections etc. If not then you are speculating that you will have a closure next month. In which case you are pushing a rope and in the end you most likely would not get the house as was noted in several of the responses above. Move on. However if you have an executable contract (no contingencies) then you could move forward, making sure you fullfil your portion of the contract, use notices to show him in breach, close and then have him evicted. Lots of risk in doing something like that (damage to the property, your time, condition of the home if you can't get in for inspections, eviction costs, etc). I would think you would want to have this house real bad for all the aggravation you are about to have. 
Stan -  I can't seem to determine whether you are the Buyer or the agent.....?

Run away and run and quick! Do not enter into any agreement as it will violate the "Arm's Length" addendum. Wait for it to get foreclosed on and have your clients purchase it at an even greater discount!

With an uncooperative seller you have no sale. Furthermore, if he wants to stay in the home I doubt he will be signing anything. The seller is the owner and in a short sale will have to sign documents to transfer the home including the approval letter from the lender and deed. Does the lender know about the BK? Most lenders won't offer an approval if the seller is in BK. Most lender approval letters have a reaffirmation of the debt which anyone in BK won't sign.  If the BK hasn't been discharged he will be able to stay in the home until debts are discharged though the BK,  he can also vacate the bankruptcy and stay in home for a little longer. Either way you have a waiting game with no good outcome.

 

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.

I'm a homeowner who faced the exact same situation in 2010, when we bought a SS home.  The seller was a woman with a 1mo. old baby & 9 yr old son, whose husband had left her (don't feel sorry for her though, I'll explain why).  Our agent scheduled a showing with the seller's agent & when we went to see the home, the seller & her kids were sitting in the living room on the couch the entire time.  My agent had instructed her that she should take the kids & leave for a short time to allow us a chance to see the home, but she didn't leave & remained on the couch the entire time.  I noticed that there was a Cadillac Escalade & a Lexus in the driveway & as we walked walked through the 3 level, 5br, 3 &1/2 ba home, we noticed that every room was filled with very expensive brand new furniture and piles & piles of brand new clothing with the price tags still on them.  This was a moderate priced home in a middleclass neighborhood & she was a nurse for a local hospital.  Our realtor told us that she had been living there free for over 2 yrs & she was spending money on luxury items instead of paying the mortgage.  Our agent warned us to be careful on placing an offer, as there had been multiple offers during the previous 6 mo.'s that had fallen through & that it might be a sign that she was sabotaging the deals on purpose, as she had a good thing going.  Well, we went ahead & placed an offer & we waited & waited for a response from the lender but nothing was moving so my agent contacted them & we discovered that the seller & her agent were both playing dirty & doing absolutely everything possible to screw up the deal.  The seller's agent was a friend of the seller & she was completely unethical, immoral etc...  Everytime that the process would move forward from the lender's side, the seller & her agent would try to undermine it.  During this time, we were living in a hotel & we had our stuff in storage, which was costing us about $2,500/mo & they knew it. This went on for months & then finally it came time for us to do a home inspection & our agent told the seller & her agent that she had to be sure to leave the home during the home inspection, to allow us a chance to get & inspect the home with our inspector.  The day of the inspection, there she sat with her kids on the couch & she remained there the entire time, just glaring at us.  As the SS process came down towards the end, the seller & her agent kept extending the closing date, claiming that the seller didn't have enough time to pack & move, even though the seller had been in the SS process for almost a yr.  They were trying to do a rentback & we refused to go that route & we just stayed firm but they just kept extending the date.  We had to go back to the house a couple of times during this 2 mo.'s stalling tactic & the seller hadn't packed or moved a single thing.  It was extremely frustrating & we almost bailed, but our agent was savy & he threatened to report the agent & seller.  When it came down to the end, the seller sat on the front porch with her family & friends & she wouldn't let us unload our truck (prearranged agreement), which cost us over $600 to just sit there with the movers.  When we were at the closing, her & her agent made stupid comments the entire time & they were very smug, as their stalling had cost us about $10,000 in hotel & storage fees for this extra time waiting .  The following mo. the seller was staying next door with one of the neighbors & she was making it a point for us to see her & she would walk by & sit out on the porch & she went around the neighborhood talking about us etc... Whatever she was saying, worked because none of the neighbors would wave or speak to us & almost a yr later, she still makes it a point to come back & sit, (even though she was supposed to have moved to SC to live with family).  We love our house but I don't think that I would want to go through something like this again, as it was very stressful & even though we changed the locks the same hour that we got into the house, I still feel unsafe, as I know that this woman was very spiteful & possibly crazy.  For peace of mind, maybe you should look for other houses, otherwise buckle up & be ready for anything! Remember that some people in a SS situation, are just looking for any excuse to scam the system & when you come along, they will blaim you as taking away their free cake.

R -

 

I commend you for being so determined to close on this house however, the seller won.  You live in fear and she controls your enjoyment of your new home.

 

If you had been my client, I would have strongly urged you to find a different house to call home.  There were way too many factors already "known" as clear indicators this would be a problem seller.

 

On the flip side, maybe she will someday understand it is not HER dream home anymore and she will move on with her life - but somehow, I doubt it.

 

Best of luck,

 

Thom Colby

Broker

Newport Beach CA

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