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ScottyMacESQ
ScottyMacESQ, Lawyer
Category: Real Estate Law
Satisfied Customers: 11212
Experience:  Licensed General Practice Attorney, Texas
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Is there a law that prohibits the renting of a short sale property

Customer Question

Is there a law that prohibits the renting of a short sale property to the previous owner?
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  ScottyMacESQ replied 1 year ago.

ScottyMacESQ :

Thank you for using JustAnswer. I am researching your issue and will respond shortly.

ScottyMacESQ :

No, there is no law that says that a buyer in a short sale transaction cannot rent it back to the owner, but most banks will have the sellersign an addendum certification(as well as agents and buyers sign) indicating that seller MUST vacate the property prior to and/or at close of escrow and specifically states that the buyer will not enter into a rental contract with the seller after escrow closes as well as being an Arm’s Length Transaction. While a bank may allow for a small transcending period for seller to move you would need to have in writing from the bank stating such is allowable. If the bank finds out a seller has retained possession after close of escrow the bank can rescind the short sale.

ScottyMacESQ :

Note that this is not a law (in that the legislature did not pass a bill and it was not signed into law by the governor) but it is under contract law if the lender requires the vacating of the premises.

ScottyMacESQ :

Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX luck to you!

Customer:

Can my bank

ScottyMacESQ :

Yes?

ScottyMacESQ :

Did you have another question?

Customer:

Will I need to pay the rest of the loan amount after the short sale?

ScottyMacESQ :

If you're the buyer, no. The short sale is where the bank agrees to accept less than what is owed on the loan in exchange for a release of lien. If you're the seller, it would depend on whether or not there is a "deficiency waiver" in the contract with the bank.

ScottyMacESQ :

That if, if there is not a deficiency waiver, they can go after you for the difference between the loan and the agreed amount.

Customer:

What is a deficiency waiver?

ScottyMacESQ :

It's merely a statement that the bank agrees that this will be the total amount that they will accept, and that they will not pursue a deficiency from the borrower / seller.

ScottyMacESQ :

Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX luck to you!

ScottyMacESQ :

Did you have any other questions before you rate this answer?

ScottyMacESQ :

Are you there? Please note that I am still here, awaiting your response.

ScottyMacESQ :

Hello?

ScottyMacESQ :

Should I continue to await your response, or may I assist the other customers that are waiting?

ScottyMacESQ :

My apologies, but I must assist the other customers that are waiting. If there's nothing else, please rate this answer. Please note that I don't get any credit for the time (~30 minutes) and effort that I spent on this answer unless and until you rate it a 3, 4, 5 (good or better) AND press the "submit" button, if applicable. If you feel that I have gone above and beyond in this answer (my average answer is about 10 minutes) bonuses are greatly appreciated. Thank you, XXXXX XXXXX luck to you!

Customer:

Are you aware of the law that was passed that the bank can not go after the seller for the difference once they have accepted and approved a short sale?

ScottyMacESQ :

I am, which is a fairly recent new law (as I see this case is California). California is the only state that has this. In that regard, they cannot pursue the borrower for a deficiency, although they can set conditions upon approval of the short sale. My answer pertaining to your question about there being a law that prohibits renting of a short sale property is what I answered specifically, and that is absolutely the case. There is no law that says that's illegal, although it could be in your contract.

ScottyMacESQ :

(that it's not allowed)

Customer:

Thank you!

ScottyMacESQ, Lawyer
Category: Real Estate Law
Satisfied Customers: 11212
Experience: Licensed General Practice Attorney, Texas
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