Investors Beware When Buying Properties That Are Tenant Occupied

By
Real Estate Broker/Owner with Phoenix Property Shoppe 602-380-4886
http://actvra.in/zlq

Investors Beware When Buying Properties That Are Tenant Occupied


In 2009 the US Congress enacted the 'Protecting Tenants at Foreclosure Act. Basically the PTFA Act offered tenants protection of not being evicted in the case of a foreclosure.  There are four qualifications that need to met in order for the tenant to keep possession of the property after a foreclosure by the landlords creditor.  

  1. The defaulting borrower can not be the same person as the tenantInvestor Beware of Buying Homes with Tenants
  2. The lease must be an 'arms length' agreement
  3. The lease must require 'fair market rent'
  4. The lease must have been executed prior to the notice of trustee sale
 
Until recently the 'notice of trustee sale meant was understood to mean the 90 day notice the lender is required to provide the borrower before proceeding with the foreclosure. Basically that meant the tenant must have signed the lease at least 90 day before the trustee sale.
 
 
Here's where it could become a big game changer for investors... according to the The Dodd Frank Act the 90 day notice requirement has been eliminated in Section 1414(1) (B).  The tenant must only show that the lease was entered into anytime before title transfers from the original borrower to a 'a successor entity or person' at the trustee sale.
 

So what does this mean for Investors buying property?  The defaulting borrower could enter into a lease with a new tenant the morning of the trustee sale thus requiring the new owner to honor the lease following the foreclosure. This means the new owner could be stuck with with renting the property for the remainder of the lease term. 

 

Investors Beware When Buying Properties That Are Tenant Occupied
 


*******************************************************  

 

Real Estate and Working with my Clients is my Passion!
 
 

wwww.phoenixpropertyshoppe.com

 
I take my clients trust in me very seriously. I'm known for 'telling' it like it is, not what folks might want to hear or  think it should look like. Now that may sound kind of tough, but think about it, in the long run if you want to buy or sell a home you need to know the real facts in order to make a wise choice.


If you want the truth and the whole truth, I am the 
Phoenix Real Estate Broker for You.


When you are ready to buy or sell a Phoenix Area Home, I will be your advocate, guide, and fierce negotiator. I will work hard to make your buying or selling a home as smooth and stress-free as I possibly can - even if it's a short sale.  Guaranteed.

 


Call me and we'll create a plan of action to buy a home or sell your home! 

 

Sincerely,

 

Anna 'Banana' Kruchten

Broker/Owner

602-380-4886 

 

                                   

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Re-Blogged 4 times:

Re-Blogged By Re-Blogged At
  1. Cathy Bureau 04/26/2012 08:30 PM
  2. Wallace S. Gibson, CPM 04/27/2012 03:15 AM
  3. Pacita Dimacali 04/28/2012 10:14 AM
  4. Gene Riemenschneider 04/29/2012 09:51 PM
Topic:
ActiveRain Community
Location:
Arizona Maricopa County Phoenix
Groups:
Certified Residential Specialists
Certified Distressed Property Expert
Realtors®
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Tags:
buying investment property in phoenix
investors beware when buying properties that are tenant occupied

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Ambassador
919,134
Fred Griffin
Get There Social Media, LLC - Tallahassee, FL
Real Estate Technology

Groan!  How will an Investor or Buyer protect themself against this?  It will be interesting to hear what the Lawyers have to say about this one.

Apr 26, 2012 06:05 PM #1
Ambassador
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Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

That will complicate some sales for sure. Politicians just don't know when to stop meddling

Apr 26, 2012 06:07 PM #2
Ambassador
1,505,266
Anna Banana Kruchten
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana of Real Estate!

Fred I heard this from one of our best attorneys today. Sneaky little thing to be 'hiding' within an act. Who does it protect?  It just seems down right wrong to allow a default borrower to create such a mess. And for what reason - because they're upset their loosing the property.

Ed - agreed.  Books and books of acts...rules you name it.  I don't expect it to change anytime soon.

Apr 26, 2012 06:15 PM #3
Ambassador
792,505
Jerry Newman
Green Home Realty, 210-789-4216,www.Selling-SanAntonioHomes.com - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Anna. this some great information for all investors to be ware of. It is certainly not in the investors favor, and the tenants could cause more damages to the new owner's investment too. I like Fred. How are investors going to protect themselves? They certainly won't be allowed to charge more security deposit.

Apr 26, 2012 07:00 PM #4
Rainmaker
1,286,270
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

Great post Anna - never buy until you are sure what the occupancy situation is.  Thanks.

Apr 26, 2012 07:43 PM #5
Rainmaker
565,928
Kathy Sheehan
Movement Mortgage 770-634-4021 - Atlanta, GA
Branch Manager

That is definitely an eye opening situation for some investors.  Great info!

Apr 26, 2012 08:02 PM #6
Rainmaker
367,426
Cathy Bureau
www.GreenHomeRealty.com - Alamo Heights, TX
Your Personal Real Estate Concierge

Hi Anna - Excellent point. This was a topic of discussion in a consumer class I attened via COSA (City of San Antonio). We offer a 1st time home buyer down payment assistant program and it specifically states that the home must be owner occupied or vacant to avoid getting trapped into payint 90 days rent to a renter, and their moving expenses. Good call to blog on this!

 

Apr 26, 2012 08:22 PM #7
Rainmaker
825,320
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

This post is excellent as I get asked this on a frequent basis and not being a Realtor I can only give te info I have heard and believed to be accurate. Now I have better reference points to back up my position... THANKS!

 

Apr 26, 2012 08:56 PM #8
Rainmaker
825,320
David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Oh and of course... SUGGESTED

Apr 26, 2012 08:57 PM #9
Ambassador
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Harry F. D'Elia
Precision Real Estate Inc. - Phoenix, AZ
Investor , Mentor, CSSN, Radio Coach, REOs, ABR

Yes, the tenant must be renting at fair market value and prove they have been making payments via cancel checks.

Apr 26, 2012 09:05 PM #10
Rainmaker
681,661
Evelyn Kennedy
Gallagher & Lindsey, Alameda, California - Alameda, CA
Alameda, Real Estate, Alameda, CA

Anna:

I came over from Cathy Bureau's reblog of your post.  You have provided important information an investor needs to know.

Apr 26, 2012 09:10 PM #11
Rainmaker
1,089,501
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

In VA, we would provide an estoppel certificate even for a residential lease and a copy of the lease ONLY if the purchaser has already submitted a contract AND signed a confidentiality agreement.

Tenant leases should NOT be provided in MLS or to "just anyone" as they often contain personal tenant information and signatures!

Apr 27, 2012 03:15 AM #12
Rainer
276,890
Kathryn Maguire
GreatNorfolkHomes.com (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

Ugh!  It makes you wonder what the legislators were thinking.

Apr 27, 2012 04:21 AM #13
Rainmaker
1,214,300
Lisa Von Domek
Lisa Von Domek & Associates LLC Team at Real Estate Broker/Associate with Real Living Real Estate Group www.LisaVon.com - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Good morning Anna,

Great post, information that every investor needs - well done!

Apr 27, 2012 04:55 AM #14
Rainer
185,421
Irene Durocher
Coldwell Banker BUYERS AGENT - Boca Raton, FL
homesweethome4u@att.net

Great advice Anna. So many people think they can Go around " the system. I will tell you

my "story " when we meet for lunch today.



Irene Durocher Coldwell Banker

Boca Raton,Fla on the Atlantic Ocean


                             bird

Apr 27, 2012 06:37 AM #15
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Karen Fiddler, Broker/Realtor
HOM Sotheby's Intl Realty, 949-510-2395 - Laguna Beach, CA
Laguna Beach & Lake Arrowhead, CA (949)510-2395

Another example of Washington meddling and making things worse in the name of "helping"

Apr 27, 2012 07:31 AM #16
Rainmaker
1,134,974
Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
PasadenaCA Real Estate Representation 818.516.4393

Anna -- this certainly blurs the concept of "protecting"  innocent parties.   

Apr 27, 2012 11:47 AM #17
Rainmaker
780,384
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

That is a scary scenario, Anna.  And, one that dissatisified owners might resort to unfortuately.

Apr 27, 2012 01:36 PM #18
Rainmaker
1,871,454
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
CRB, CRS, CIPS, GRI, SRES, TRC, e-PRO

Anna

Your advice is right on point it can develop into a big time problem.

Good luck and success.

Lou Ludwig

Apr 27, 2012 07:27 PM #19
Rainmaker
665,364
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Anna

As buyer's agent, we can insist as a condition of purchase, that the property is delivered vacant, and that the seller provide proof that notice to vacate at a certain date has been properly delivered to the tenants. If sellers refuse, then it's up to the buyer to decide whether to proceed with the purchase or find something else.

This is good information to share. Thanks!

Apr 28, 2012 10:12 AM #20
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Anna Banana Kruchten

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