Expert: Lori Frankfort - 6/3/2009

Question
We are the Tenants of a unit that is up for a Short Sale. We put an all cash bid down. We need help with the Terms of the continued occupancy during the sale process.

1) Our lease ends on 6/10/09
2) The Trustee owes $378k
3) Notice of foreclosure was set for 5/5/09, she got it extend the day of to 6/19/09.
4) She applied our deposit to the last month of or rent
5) She owes us a total of $400 deposit for our dog and keys
6) She is offering to give us the last month's rent when the unit goes into escrow
7) We pay $1395 a month
8) The unit is currently listed at $204k
9) We put an all cash bid of $175k

A) Should we ask for a reduction of rent? Say down to $1000?

B) What if the unit does go into foreclosure? We won't get that last month's rent free that she is offering us. We live in CA so we understand that in the event of a foreclosure we get a 60 days' notice to vacate the property upon recipe of a written notice. What kind of concessions/guarantee should we ask from our trustee/owner?

C) Since we put down a all cash deposit, how willing and cooperative should we be in letting her show it to other people. I understand that we DON'T have to let anyone in to see the place. What would benefit the process of our sale

D) Why would the banks only give a 44 day extension? Would they likely extend it again?

E) Anything else we need to consider?

Answer
ARE YOU SURE IT IS A SHORT SALE AND NOT A FORECLOSURE?  THEY ARE VERY DIFFERENT.  IN ONE INSTANCE YOU'RE DEALING WITH THE OWNER AND THE BANK HAS APPROVAL RIGHTS, IN THE OTHER IT'S JUST THE BANK.  WITH THE AUCTION DATE SO CLOSE, I WOULD ASSUME IT'S A FORECLOSURE.  DO YOU HAVE AN AGENT REPRESENTING YOU?

SHE'S PROBABLY NOT PAYING HER MORTGAGE, SHE'S JUST KEEPING YOUR MONEY.  YOU'RE NOT GOING TO GET ANYTHING BACK FROM HER, PERIOD.

A) Should we ask for a reduction of rent? Say down to $1000?

YES, BUT JUST KNOW THAT IN THESE CIRCUMSTANCES IT SOUNDS LIKE SHE'S GOING TO LOSE THE UNIT NO MATTER WHAT.  IF IT'S REALLY A SHORT SALE (WHICH I DOUBT, AND YOU NEED TO FIND OUT) IT'S GOING TO TAKE UP TO A YEAR TO GET APPROVED.  DURING THAT TIME THERE'S NO GUARANTEE THAT THE MONEY YOU'RE GIVING HER IS GETTING THE MORTGAGE PAID, THUS IT BECOMES A FORECLOSURE.

B) What if the unit does go into foreclosure? We won't get that last month's rent free that she is offering us. We live in CA so we understand that in the event of a foreclosure we get a 60 days' notice to vacate the property upon recipe of a written notice. What kind of concessions/guarantee should we ask from our trustee/owner?

THE BIG ISSUE HERE IS WHETHER OR NOT IT'S REALLY ALREADY IN FORECLOSURE.  IF IT IS, IT'S TOO LATE TO NEGOTIATE WITH THE BANK, AND SHE'S GONNA KEEP ANY MONEY YOU GIVE HER.  YOU NEED SOME SORT OF PROOF THAT SHE HAS BEEN PAYING HER MORTGAGE.  I DOUBT SHE HAS.  FIND OUT IF SHE HAS PROOF THAT SHE HAS PAID AND IS CURRENT.  IF NOT, SHE'S IN DEFAULT AND IT'S MOST LIKELY A FORECLOSURE.  IN THAT CASE YOU NEED TO BE DEALING WITH THE BANK DIRECTLY.  YOU CAN PROBABLY BUY THE UNIT FROM THE BANK, AND IF YOU HAVE GOOD CREDIT THEY WILL PROBABLY GIVE YOU THE LOAN AS WELL.  IN THEORY YOU'RE SUPPOSED TO GET 60 DAYS, BUT I'VE HEARD TOO MANY STORIES OF TENANTS NOT KNOWING ABOUT A FORECLOSURE, I.E. THE OWNER REMOVED THE NOTICE, ETC. AND HAVING TO MOVE OUT DAY OF WITH NO NOTICE.  FOR YOUR FAMILY'S SAKE, I SUGGEST YOU HAVE A CONTINGENCY PLAN.  FIGURE OUT WHERE YOU'RE GONNA GO WITH YOUR DOGS AND STUFF IF THAT HAPPENS.

C) Since we put down a all cash deposit, how willing and cooperative should we be in letting her show it to other people. I understand that we DON'T have to let anyone in to see the place. What would benefit the process of our sale?

DOES SHE HAVE THE UNIT LISTED WITH A REALTOR?  YOUR LEASE REQUIRES YOU TO SHOW COMMON COURTESY IN SHOWING THE UNIT.  YOU DO HAVE TO LET OTHERS IN, YOU DON'T HAVE TO BE POLITE OR CLEAN.

D) Why would the banks only give a 44 day extension? Would they likely extend it again?

IT'S HARD TO KNOW THE EXACT CIRCUMSTANCES WITHOUT YOU BEING THE OWNER.  OBVIOUSLY I DON'T KNOW YOU, BUT IF I WERE YOU I WOULDN'T BUY IT, I WOULD MOVE OUT.  CONDOS ARE ALMOST NEVER A GOOD INVESTMENT, AND UNLESS YOU'RE INTENDING TO RIDE OUT THIS WAVE OF THE MARKET YOU WILL LOSE MONEY.  IN CALIFORNIA YOU NEED TO OWN LAND.  FIND A SMALL HOUSE YOU CAN AFFORD.  THAT'S MY OPINION.  BUT THIS MESS SOUNDS LIKE A CAN OF WORMS.

E) Anything else we need to consider?

JUST LIKE I KEEP SAYING, YOU NEED TO KNOW IF IT'S IN FORECLOSURE.  IF IT DOES GO INTO FORECLOSURE, DON'T MAKE ANY MORE PAYMENTS FOR RENT TO THE OWNER.

The above comments were only advice not knowing your personal circumstances.  You should consult your real estate agent for more specific instructions.

Good luck,
Lori