Los Angeles

[hg213]

Take a look at this short sale listing:

http://www.redfin.com/CA/Compton/822-W-Plum-St-90222/home/7344089

As you see, the listing states that they are:

"Looking for an investor willing to lease back to current occupants."

Is this legal in the context of a short sale?

[Adam-la]

Not sure if it is a matter of legal/illegal but the lenders typically have buyers and sellers in a short sale transaction attest to being arm's length parties and that there is no agreement to lease back the property. 

[Bruin99]

Two points.

First is what Adam la made, most short sale transactions have the addendum attesting to the fact that the property will not be leased back to the owners.  I'm not sure if breaking that attestation would be considered illegal, but definitely against the contract and probably fraud.

Second, they specified occupants, not owners.  It is possible that there are renters in the property currently and they are looking for someone to buy the home and continue renting the property to those renters.  This is legal and I believe even required by law if those renters have a lease agreement.

[Andiamo53]

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Bruin99 wrote:

Two points.

First is what Adam la made, most short sale transactions have the addendum attesting to the fact that the property will not be leased back to the owners.  I'm not sure if breaking that attestation would be considered illegal, but definitely against the contract and probably fraud.

Second, they specified occupants, not owners.  It is possible that there are renters in the property currently and they are looking for someone to buy the home and continue renting the property to those renters.  This is legal and I believe even required by law if those renters have a lease agreement.

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Bruin--I'm going to challenge your theory that there might be legitimate tenants with a lease currently occuying the premises. Unless the lease is for several years (highy unlikely in an arms length situation) why would the sellers care about their tenants? I smell something very shady here. If the tenants do in fact have a really long lease, you can be sure it inures to the benefit of the seller (maybe the tenants are relatives or plan to sublease back to the sellers). There was another shady short sale posted here a few months back with similar circumstances.

If I'm right, then proving fraud (and it still IS fraud) would be more difficult. IMHO, these sellers (and their agent) are too clever by half. If the sellers (and/or their proxy tenants)  are not willing/able to pay the mortgage reliably why would any future landlords in their right mind think the "occupants" would be any more willing/able to pay the rent reliably?

[Bruin99]

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Andiamo53 wrote:

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Bruin99 wrote:

Two points.

First is what Adam la made, most short sale transactions have the addendum attesting to the fact that the property will not be leased back to the owners.  I'm not sure if breaking that attestation would be considered illegal, but definitely against the contract and probably fraud.

Second, they specified occupants, not owners.  It is possible that there are renters in the property currently and they are looking for someone to buy the home and continue renting the property to those renters.  This is legal and I believe even required by law if those renters have a lease agreement.

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Bruin--I'm going to challenge your theory that there might be legitimate tenants with a lease currently occuying the premises. Unless the lease is for several years (highy unlikely in an arms length situation) why would the sellers care about their tenants? I smell something very shady here. If the tenants do in fact have a really long lease, you can be sure it inures to the benefit of the seller (maybe the tenants are relatives or plan to sublease back to the sellers). There was another shady short sale posted here a few months back with similar circumstances.

If I'm right, then proving fraud (and it still IS fraud) would be more difficult. IMHO, these sellers (and their agent) are too clever by half. If the sellers (and/or their proxy tenants)  are not willing/able to pay the mortgage reliably why would any future landlords in their right mind think the "occupants" would be any more willing/able to pay the rent reliably?

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Don't disagree with you.  In all likelihood something shady is going down, but there still is a small chance that this is something legitimate and not illegal.

If this is the case of being renter occupied and not a homeowner occupied, it is no different than buying an apartment complex at a short sale - the buyer is still required to abide the lease agreements in place.  Now granted the likelihood of shady leases/issues going on in a SFR is higher than with the sale of an apartment buildling.

[JG1]

The listing itself contains a possible clue:

Very niece property, 3 bedroom, 1 bath, legal es 2 bed, 1 bath. Looking for an investor willing to lease back to current occupants. Please call or email for any questio

[RoadTripper]

Here let me help you:

This house is in Compton 2 blocks north of Rosecrans...why in the hell are you looking at investments there.  Buying cheap things and calling them investments is a very hard/difficult/risky/headache way to play around with your money. You would be wise to go to vegas, lose half of that on blackjack, have another lifetimes worth of partying for $10,000 at the Palms...then crawl back to LA with the remaing $40,000.  You would probably end up ahead with this strategy!

[hg213]

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RoadTripper wrote:

Here let me help you:

This house is in Compton 2 blocks north of Rosecrans...why in the hell are you looking at investments there.  Buying cheap things and calling them investments is a very hard/difficult/risky/headache way to play around with your money. You would be wise to go to vegas, lose half of that on blackjack, have another lifetimes worth of partying for $10,000 at the Palms...then crawl back to LA with the remaing $40,000.  You would probably end up ahead with this strategy!

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And your experience with real estate investment is what?  Have you tried investing in Compton real estate?  Do you know anything about it?

I own several Compton properties.  I have not been disappointed with any of my investments there.  All of them have been profitable.

But thanks for the "help," just the same.  And by all means, please share more of your investment insights.

[newatthis]

Maybe the current occupants are the owners and don't want to move?

That would be my guess. They are asking you to lease to the owners after closing so they don't have to move.

I wouldn't lease a house to someone who couldn't pay the mortgage unless I personally knew them. too much potential downside.