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.
It happens often. Depends on the investor, and whether they define the tennant/owner realtionship as a biz relationship.
Thank you Wayne. That is indeed what ASC is doing, defining the tenant/landlord relationship as a business relationship.
One reason why we suggest to the sellers they do sell to the tenants. It just complicates an already complicated transaction.
Investor or servicer, actually nobody can interfere with a contract, which is what a lease is. If the lease states the two parties have an agreement that Tenant has 1st option to buy when it is sold than that Investor cannot interfere with said agreement. They cannot require the Seller break the lease as a condition of the short sale being approved.
You suggesting to a seller to disregard a contract puts you in a mess. Once way more complicated than short sale hell.
The short sale lender can simply reject the short sale request, which is exactly what it appears will happen due to ASC's interpretation of the Arm's Length Transaction requirements. Therefore, the contract with the tenant is moot - it cannot be closed. The bank is not requiring that the Seller break the lease, they are just making it impossible to sell the property to the tenant. The Seller does not have to disregard the contract to get out of this. All they need to do is submit the short sale request to the bank in good faith and have it rejected by the bank, which it will be. Given this information most tenants/buyers would voluntarily just agree to terminate the contract very early on the process and allow the Seller to move forward. I see no issue here unless you think tenants should be able to buy short sales.
ASC - American Servicing Company is an arm or division of Wells Fargo Home Mortgage. Here in CA , ASC has a high amount of filings against it. ASC get things wrong all the time.
Any bank that provides you, the agent, with a written statement of fact that reports a Tenant/Landlord relationship is considered a business relationship they are misinterpreting what the law states.
In this case, Lisa Jalufka, her client and this tenant are all advised to contact an attorney with said document. Attorney will provide ASC with “proper” interpretation of what the Fed/State and Local laws are.
ASC will then need to use another reasons to reject the short sale offer.
I do think tenants should be able to buy short sale. What is your position?
Patti, I agree, this should not be a problem in most cases. Most cases the tenant and homeowner have never even met and they pay the rental management company directly and never the homeowner. Not to mention, if the bank does their due diligence and the tenant is willing to pay the amount the bank is asking for, I do not see a problem, in most cases..
The tenant should be able to purchase the property as long as the Bank has been provided with proof that the house was actively marketed, and the tenant's offer is the highest and best. However, although that makes sense - the Bank has the right to deny a Short Sale request for ANY reason they choose! If they have a policy of not approving a sale to a Tenant because they are not a "disinterested third-party" then they can do that. No lienholder has to give ANY reason why they are rejecting a request to accept less than the full balance on the loan. If they want to turn down all applications received on a Thursday, for example. Or any offers that are delivered by fax instead of uploaded. Or any contracts written on odd days or a full moon. Who cares! It's their perogative. Part of the Golden Rule: He who has the Gold makes the Rule.
You are absolutely right, Ron. Everybody loses sight of the fact that the Bank is simply deciding whether or not they wish to accept a short pay-off on the loan. They are not making the seller break his contract with the tenant. The seller breached his contract with the Bank when he stopped making payments!
I'm working on one right now, same thing, what a sad issue, the tenant when and renovated the entire house thinking she will be there forever and one day she will buy the home. The seller moved from the area, did not pay the mortgage for few months and they want me to get rid of it. The tenant go's and show's me all the bills, invoices and receipts they paid to fix the property over the 3 years they been in the house. So sad. They promised to rip of everything they did to the house and go find the owner and get even with her. So much to deal with and I don't even know if worth trying to help them. Sad
I have the same situation now and the servicer said they would have to move out in order to buy it....maybe go stay with the homeowner for a month or so LOL
We work with an investor that does these type of transactions. They buy the short sale and resell it to whomever they like. Email me if you would like us to look over the deal.