Selling your home usually means that you are going to move out-but I keep getting asked the question, "Is it possible to short sale my home and rent it back from the new owner?" Most of these homeowners would love to keep on living in their home, even if as a renter instead of the owner. While it may seem like the perfect solution to a struggling borrower, there are some serious problems that could arise with this scenario.
The federal short sale program, HAFA, has been around for almost 3 years. This subsidized plan offers protections and incentives to those homeowners who participate. Along with these benefits come some restrictions-one of which is that all parties involved sign an affidavit. This form is signed under penalty of perjury and states that the transaction is an arms length sale and that no side agreements have been made. It also plainly states that the homeowner may NOT stay in the home as a renter or have any type of "buy back" agreement with the seller.
Even if the short sale is not completed under HAFA, the vast majority of lenders have their own restrictions on the rent back option, and require all parties to sign an amendment stating that. Real estate agents, investors and sellers need to be very careful, as violating these restrictions constiture bank fraud-meaning that you run the risk of federal prosecution.
So, knowing all of this, why do I see real estate ads enticing distressed sellers to list their home, with the promise of a rent-back and even a future re-purchase option? Is there some loop hole that I don't know about or are these folks hoping that the banks don't catch on? One caveat of these rent back offers is that the purchaser is a pre-determined investor put in place by the listing agent. This means that the transaction is handled by the same firm-representing both the seller and the buyer. This also means that the seller is at the mercy of the listing agent and may not be getting accurate and credible information on how the short sale should be handled in order to comply with the bank's guidelines.
Keep in mind that the Affidavit is signed under penalty of perjury by all parties, and I for one would not even consider risking the consequences of bank fraud. Sellers are often so confused and frightened that they are vulnerable to anything presented to them that sounds like a solution. Bottom line, if it sounds too good to be true...well you know the rest.
Susan Gregory is a Realtor, trainer and Author of two publications for homeowners, including the best selling resource, The Complete Loan Modification Guide kit and Loan Mod Calculator. She is HAFA Certified, a Certified Negotiation Expert, Short Sale and Foreclosure Resource Agent. Visit susangregoryrealtor.com for more information.
Good article on Short sales. Thanks for posting it. I'll reblogging it too. I've got a HAFA short sale closing this month inthe Austin area.