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Short sales and the uncooperative tenant

The Role of the Tenant in the Short Sale

According to a recent study by an organization called Tenants Together, 37% of residential foreclosures in California in 2009 involved investment properties and, more importantly, tenants. In my short sale negotiations, I have seen that the “tenant factor” has become increasingly more common. Investors, either because they are down on their luck or because they have plotted a strategic default, opt to short sale their properties. Many of these investor owners continue to collect rent until the short sale has been completed; this rent then fills their pockets while the tenant is left in a home that is facing imminent foreclosure.

Some of these tenants are mad, raging mad. Do you blame them? After all, if you found out that you were paying your rent for your family’s home and you were going to have to move by no fault of your own, you might be mad, too!

With short sales, here are some of the behaviors that I have recently observed in angry tenants:

  1. Tenant will not answer the door. They will not allow anyone to enter the property—prospective buyers, agents, or appraisers.
  2. Tenant will leave the screen locked from the inside so that anyone who has a key from the lockbox will still not be able to access the property.
  3. Tenants will refuse to leave at close of escrow.

I have seen some tenants do several other crafty things in order to sabotage the short sale primarily because they are in a serious tiff with their landlord, the homeowner.

There are certain short sale listings which can be challenging. One of these listings is the listing with the uncooperative tenants. It is vital to work out the situation with the tenant at the very beginning of the short sale process. As you have seen in my examples, this situation, if not resolved, can create a serious problem for the real estate transaction further down the road.

In addition to uncooperative tenants, there are a few other issues that can make a short sale listing a little bit more difficult. These include listing a property with excessive liens and working with an uncooperative seller.

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Don’t get me wrong. I love short sale listings. Never before have I seen the real estate market provide me with such a wonderful opportunity to take more listings than ever before, and help more clients than every before. But, when given my choice of short sale listings, I would probably have to think twice if the listing included an uncooperative tenant.

Written By

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®, and Chief Executive Officer of Transaction 911. Before landing in real estate, she had careers in education and publishing. Most recently, she has been able to use her teaching and organizational skills while traveling the world over—dispelling myths about the distressed property market, engaging and motivating real estate agents, and sharing her passion for real estate. When she isn’t speaking or writing, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

13 Comments

13 Comments

  1. danadean

    June 3, 2010 at 10:47 am

    Excellent post about what may happen when investment properties go into short sale. Is is fair to the tenant? In my opinion, no. However, not much that deals with real estate these days falls ino the fair category. It is simply the risk you take when you are a renter.

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