I am financing the purchase with a 2nd home mortgage. I talked to my lender whether it was allowed to do this and they said that I have a 45 day rental grace period at the beginning of the loan if renters are already occupying the property. 45 days after closing I am not allowed to have renters in it.
As to this - first you should already know if the seller has renters booked for the summer and for what time period they are booked for. Again, you buy the property subject to the vacation rentals the seller has booked. Those vacation rentals are like small tenancies for the period for which they are booked.
Moreover, that he can't rent beyond 45 days after the scheduled closing should been made as part of your sales/purchase agreement - or if the seller had done so before the sales/purchase agreement was executed, the closing be pushed back to comply with the lender's demands.
However, I'm sure that your lender is not going to do a physical inspection after the closing and funding of the loan to make sure there are no tenants. They do not have the resources nor will make the commitment to do such. Even if there is 1 rental after the 45 days - your lender most likely won't know about it unless you inform them AND it would be a huge expense and ministerial breach of the loan if there was. You thereafter will just have to comply with the loan requirements.
Technically, as soon as the sales/purchase agreement is signed - you are the equitable title owner of the property now. Equitable title
is the right to obtain full ownership of property
, where another maintains legal title to the property. Legal title
is actual ownership of the property. When a contract for the sale of land is executed, equitable title passes to the buyer. When the conditions on the sale contract have been met, legal title passes to the buyer in what is known as closing
This should all be a part of the sales/purchase agreement between you and the seller.
You also asked:
The seller knows this, so he may try to book a rental past my 45 day window, jeopardizing my ability to obtain financing. If this happens will I not be able to obtain financing and lose my earnest money or will I be able to cancel any future scheduled rentals with vacation rental tenants?
As stated, it should be stated in the sales/purchase agreement that they aren't to book any more rentals beyond the scheduled closing date. If the agreement is silent on the issue then you buy the property subject the already scheduled rentals.
That is always the case - a buyer buys the property subject to the existing leases. A vacation rental is a lease - although only for a short time - it's still a lease.
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