Short Sale Blog

Here is the latest short sale news at Seattle Short Sales. We assist hundreds of Seattle area homeowners with short selling their home and avoiding foreclosure.

Tenants’ Rights Following Foreclosure or Short Sale of their Rented Home: Part 2

Seattle Short Sales - Wednesday, March 13, 2013
This article is Part 2 of a two-part series about the rights tenants have when the home that they are renting is threatened with foreclosure. Part 1 explained tenants’ rights when foreclosure is pending. This instalment looks at how much notice must be given to tenants to vacate the home in the case of a short sale, or following foreclosure and a Trustee Sale.

The regulations governing how much notice renters must receive to vacate is different for a property that has been foreclosed upon than it is for a property that has been sold (including through a short sale). Here is some general information regarding the regulations in Washington State, and on the rights and obligations of tenants:

Eviction following foreclosure:

Within the context of a foreclosure, the 20 days-notice to vacate is not applicable. Following a foreclosure trustee sale and after the transfer of the property to a new owner, regardless of whether it’s a fixed-term or month-to-month lease, the new owner may give notice to the tenants to vacate.

Washington State law requires a new owner to given tenants a minimum of 60 days notice to vacate, but this is effectively superceded by federal law, which requires a minimum of 90 days notice. These timelines apply only to the case of a new owner following foreclosure and a Trustee Sale. As a tenant, you must choose whether to take the 60 days notice, or assert your federal right for the 90 days notice - because you receive different benefits depending upon which you choose.

If you intend to continue occupying the home for the full 90 days, you should let the new owner know that that is your intention. Since you are asserting your right to occupy under federal law, you must also obey  federal law, which requires you to continue paying rent. You are also required to meet any other obligations specified under the original lease contract.

However, if you only intend to occupy the property for the 60 days specified by state law, the state law mandates that you cannot be evicted for failing to pay rent. In effect, you may continue to occupy the property for free for up to 60 days following foreclosure. (You still could be evicted during this period for committing waste or nuisance, however). If you stay beyond the 60 day “free” period, the new owner may file suit against you and force the eviction through an unlawful detainer action. You don’t want that eviction to come up during a background check in the future when apartment hunting.

You can, of course, always decide to sign an updated lease with the new landlord if that is presented to you as an option following foreclosure. 

Eviction following a short sale:

When the property changes hands through a normal real estate transaction or though a short sale, the new owner enters into the same lease agreement with the tenants as the previous owner had. The previous owner transfers the security deposit that the tenants paid to the new owner. In other words, the prior lease agreement is binding on the buyers.

If the rental agreement is on a month-by-month basis, according to Washington State law, the landlord must give the tenants a minimum of 20 days notice to vacate. If the 20 days are within a rental period that the tenant has already paid rent for, the tenant may be due a pro-rated partial rent refund.

If the rental agreement is for a fixed time period, the new owners must honor that agreement. 

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/

You can also contact Lambros Politis on Google+ or to find more up to date information on this subject, go to the Ark Law Group Blog. 

Tenants’ Rights Following Foreclosure or Short Sale of their Rented Home: Part 1

Seattle Short Sales - Monday, March 11, 2013

This article is Part 1 of a two-part series about the rights tenants have when the home that they are renting is threatened with foreclosure. This instalment discusses tenants’ rights when foreclosure is pending. Part 2 of this series will look at how much notice must be given to tenants to vacate the home in the case of a short sale, or following foreclosure and a Trustee Sale.

Not all underwater homes are owner-occupied. In many cases, homes that are threatened with foreclosure are rentals. How does the prospect of foreclosure affect tenants who are living in an underwater rental home?

The impact on tenants ultimately depends upon how the property owner chooses to deal with the threat of foreclosure, and how much they choose to communicate with the tenants about the situation.

Pending foreclosure:

If a property is going into foreclosure, according to recently passed Washington State law, the Trustee is required to give tenants of a rental property facing foreclosure a minimum of 90 days notice before the foreclosure sale date.The Trustee was already required by law to post notices of the foreclosure on the property, but the new law requires them also to mail notices of the foreclosure sale to the tenants. This foreclosure notice is not an eviction notice; it is simply to make sure that the tenants are informed about the situation.

A landlord who is facing foreclosure may choose to try to do a short sale, in order to avoid being foreclosed upon. It is generally easier to sell a property with tenants who are on a monthly lease than on a fixed-term lease, because the tenants can be evicted with 20 days notice if they are on a monthly lease; this makes the property more attractive to any potential buyer who intends to occupy the home.

For this reason, if tenants are on a fixed-term lease, landlords might approach them about converting to a monthly lease in exchange for an incentive of reduced rent. Tenants are not required to change the terms of their lease if they do not want to, but the reduced rent offered may make it worth their while to do so.

Tenants requesting a short sale:

Receiving notice that the home you are renting is facing foreclosure may open the possibility for some tenants to purchase the property as a short sale. If you are a tenant and are in the position to obtain financing, this is an opportunity not only to avoid having to move, but to purchase a home at a discounted price.

Most lenders will consider allowing a tenant to purchase a home that they are foreclosing on as a short sale, because lenders usually will recover more from their bad mortgage through a short sale than they will through the long process of foreclosure - especially a short sale with an interested buyer already in place. The landlord will also usually be open to a short sale, as it will be a faster solution, as well as much easier on their credit rating, than foreclosure would be.

If you would like to purchase the home that you are renting as a short sale, you should contact your landlord, the owner, as soon as you are aware that the property is in trouble. The sooner you get the short sale process started, the more likelihood you will have of succeeding with the deal.

The second instalment of this series will explain how much notice to vacate a property the owner (or new owner) is required to give tenants: prior to foreclosure, following a short sale, and following foreclosure.

Seattle Short Sales has a team of experienced and successful real estate specialists dedicated to working with distressed homeowners. We close, on average, 12% of all short sales per month in King County. In the last 24 months, we have negotiated over 756 short sale approvals, and discounted over $81 million of mortgage debt for distressed homeowners.

In addition to our short sales negotiators, our team includes dedicated professionals advising and advocating for homeowners in the fields of: loan modifications, bankruptcy, debt settlement and collection defense. As part of our service, we offer unlimited attorney and CPA consultations.

If you are a homeowner who is struggling to make ends meet, and would like to learn more about the options available to you, please go to: http://seattleshortsales.com/homeowners/ 

New Seterus/Suntrust Short Sale Approvals: Homeowner in Lake Stevens, WA, Receives $111,000 Loan Discount on Mortgages on Investment Home - Both Deficiencies Waived!

Seattle Short Sales - Tuesday, October 16, 2012
This Lake Stevens, WA, homeowner avoided foreclosure on his investment home through a short sale - without affecting his primary home. He owed $199,960 on his Seterus first mortgage, and $37,492 on his Suntrust second mortgage - a total of $237,452 of debt. But his home was valued at only $145,000.

We received short sale approval letters from both lenders in September. Seterus has issued their approval, accepting $120,285 net proceeds on the $199,960 mortgage balance owing - a discount of $79,675. Suntrust issued their approval, accepting $6,000 net proceeds on the $37,492 mortgage balance owing - a discount of $31,492.

The total discount that this investment home owner received was $111,167, and both lenders waived him of ever having to pay those deficiencies. This means that he can focus on staying current on the mortgage on his primary home, without worrying about those old mortgage debts following him around.

You can read the Seterus short sale approval letter here: 9.30.12_Seterus_1st_Lien_80k_Deficiency_Debt_Settled_Short_Sale_Approval.pdf

You can read the Suntrust short sale approval letter here: 9.21.12_Suntrust_2nd_Lien_31k_Deficiency_Debt_Settled_Short_Sale_Approval.pdf

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

How to Short Sale a Rental Property: What Owners Need to Know

Seattle Short Sales - Monday, September 10, 2012

What does an owner of a distressed rental property do if the property that they intend to sell in a short sale is subject to a tenant's lease?

In most cases, owners of unprofitable or “upside-down” (negative equity) rental properties may short sale their property - without providing notice to the tenants or seeking the tenants’ permission. The exception to this would be where the rental agreement contains a provision that requires that the landlord give the tenants notice of his or her intent to sell, or contains a "subject to tenant's approval" clause. An example of such an approval clause would be a "rent-to-own" option, where the occupying tenant would have the first right of refusal.
 
That said, the new owners must take the property subject to the existing lease. For some prospective buyers, this could be a reason not to buy - for example if the buyer would like to live in the home shortly after the sale. However, other buyers might find a home that is currently occupied by a renter more attractive, especially those looking to purchase an income-generating investment property.  
 
One wise move for a landlord who is about to list a rental property as a short sale is to renegotiate the lease with the tenant, offering reduced rent in exchange for moving to a month-to-month basis. Doing so will enable the selling landlord to provide sufficient notice to the tenant, affording him or her ample time to relocate prior to the approval of the short sale.
 
In contrast, in a foreclosure setting, tenants have a statutory right to occupy the property for 60 to 90 days following a trustee's sale. (However, if the lease terminates prior to foreclosure, then the tenant cannot avail him- or herself of this right to reside for 60-90 days).

More importantly, and of more concern to the landlord, is that in a foreclosure situation, the tenant can pursue the landlord for damages in court for breach of the lease. So, whether there is a short sale or a foreclosure in the works, it is in the homeowner’s best interest to re-negotiate the terms of the lease with the tenant prior to the transfer of property.  

If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/

If you are a real estate agent, and would like to learn about our no-fee short sale service, please go to: http://seattleshortsales.com/agents/


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