Over the past few years we have been specializing in helping Sacramento area home owners avoid foreclosures by selling their homes and requesting their lenders accept the proceeds as satisfaction of their loans.  These are called “short sales” because the proceeds of the sale are not enough to pay off the loans on the house.  In these sales the lender must approve the sale.

Doing short sales for investors or any rental property is always more difficult when there are tenants living in the property to be sold.  Renters often become less than cooperative when they learn the home they are paying monthly rent to live in is being sold.  This is understandable because they are paying rent and wonder why the landlord can’t continue to make mortgage payments.  In addition they are faced with an unexpected and unwanted move and are inconvenienced by having to deal with potential buyers who want to see the home.

We typically suggest to owners that they wait until the home is vacant or at least work something out with the renters to obtain their cooperation.  This can generally be accomplished by a reduction in rent while the house is on the market.  Even with these agreements in place, renters often are less that cooperative or helpful in the selling process.  We have dealt with renters who make it almost impossible to show the house, who don’t clean the house and even those that insist on being present during showings and take delight in pointing out the flaws in the home.

We recently had renters who said they wanted to buy the house and submitted a contract through their own Realtor.  We thought this was great, we and the sellers believed we had a committed buyer who would be patient during the short sale negotiations.  When the approval from the short sale lender was received we were shocked to be told the renters were, not only not interested in buying had been in contract on another home for several weeks.  In our opinion they either never wanted to buy the home or if they did, changed their minds very quickly and to avoid being bothered to show the house to other prospective buyers, they let us and the sellers believe they were going to purchase the home.

In addition to the renter issues, short sales for non-occupant owners are more difficult to get approved by their lenders.  The lenders appear to scrutinize the request from these sellers more than others.  This is particularly true the original loan required Mortgage Insurance.  Because they stand to take the loss, the insurance company must approve these short sales and more often than not will want the owner to contribute to the short fall. 

Short sales for investors can be done successfully but often have issues that require more attention from the listing agent and greater knowledge to not only deal with the lender but know when and how to negotiate with the insurance company if there is a PMI policy.

If you or someone you know has a rental property and can no longer make the monthly mortgage payments feel free to call me at 916 290-9339 or send me an email to juliej@jalone.com.  We have experience in dealing with these properties.