Has anyone run across this before?

The seller decided to do a short sale, and moved out. They accepted my buyer’s offer and the listing agent has just sent the SS package off to the banks (Bank of America). My buyers just let me know they want to rent the property while they wait for the short sale lenders' approval.

Pros
- property doesn't sit vacant (squatters, vandalism)
- landscaping doesn’t die
- buyers get to start enjoying the property now
- buyers aren’t going to keep shopping – content to wait it out
- Some of the rent could be put in escrow to go toward seller’s closing costs that might not be covered by the bank. Potentially ALL the rent could be used as a credit on the seller side – yielding more proceeds for the SS lenders (where none of the rent money would go to the seller).
- ??

Cons
- property is now categorized as “investment” (wouldn’t that be the case anyway since the seller has left the property?)
- tenancy issues would have to be dealt with if buyer’s financing doesn’t go through or if the SS lenders do not approve the SS.
- ??

Anyone done this before?

Even if you haven't done this before, let me know if you think there are other "Cons".

Thank you!

I've had this same question. And what follows is in NO WAY legal advice or expert advice or even good advice... just some thoughts.

First, it makes perfect sense to me that the buyers move in. They'll take care of the home, pay the utilities, make sure it doesn't get vandalized and of course, become more committed to the home. Of course there are downsides anytime you do an early possession, but in the case of a short sale that's vacant, I think the positives outweigh the risks.

However, collecting rent is questionable. The homeowner isn't paying the mortgage, in all likelihood and in some circles, this practice is considered illegal. It's not likely that he'd logistically be able to give the money to the bank.

If it were my property, I'd probably just let the renters move in and take over all bills and maintenance on the property.

Again, this is not legal or expert advice!

Thank you Jennifer. Great thoughts.

I too was reluctant to consider having rent payments go to the seller. Since it would have to be disclosed to the short sale lender(s) - they would likely think twice about the way they write the approval on the short sale.

However, if the "rent" was put into the escrow account for the sale (as a credit on the seller's side) it might be looked upon favorably by the SS lender(s). Since the SS approvals are written with a "no proceeds are to go to the seller" clause all of the rent collected would directly benefit the SS lender and would cover some of the selling costs and help to reduce the losses they'll sustain.

I'm going to call the Realtor's legal hotline here and get their take on it.

This is not legal or expert advice.