Profile picture for Dizaster

Help! Should I move before short sale deal done?

Hello everyone,

I need help! Let me give you some background so you know where I am now. In May I put an offer on a short sale, I gave my agent and seller agent a deadline of August 1st as my deadline for waiting. Anyways, my offer was placed in May, bank counter offered 7k higher, I accepted. The next part was waiting for the approval letter, I waited patiently until August 7th and decided to call it quits. September 7th, Sellers agent contacts me that approval letter is in. Bank wants to complete sale, I re-thought about it, seller's agent dropped loss mit fee as well so I decided to go ahead with it again. He told me they are ready to close end of october. I called loan company got everything ready from my end, even did inspection, my lender sent an appraiser, report still pending, ALL documents are in from my end. Lender is asking for approval letter, seller's agent does not have it yet but he tells me that he has a verbal approval just waiting on the letter. Of note he did  have an Approval letter from the previous time I placed the offer, letter was dated end of August with Close date end of September.

I ended my lease at my apartment for end of October. At this point, I am waiting on new/updated approval letter, seller's agent says its a done deal and I should be able to close by end of october. He says if not then he will let me move in before we close as the current owner had moved out.

We have "verbal approval", no letter approval, will I get the letter in time to close end of october? Should I move in if the closing does not have happend end of october?
  • October 13 2013 - US
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Answers (20)

Your dilligence is paying off! The govnernment shut down will hold things up a bit. (If you are getting a USDA loan, you might expect it to be held up at least 3 weeks more due to the back log from the shut down.) Don't worry too much, it's nothing new.

For other short-sale buyers that might be reading this post; patience and details and follow through, follow through, follow through are key!

Good luck! 
  • October 17 2013
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Profile picture for Dizaster

Grace, to answer you question "I think the question you should be asking is (yourself) "why did I hire the banks selling agent?"


To be honest looking back I really did not have a choice as to choosing who would represent me.

When the listing was posted I did not have an agent, It was still the very beginning of my house hunting. I called the listing agent on the property who set me up with one of his co-realtors, same company to come and show me the property.

This agent that showed me the property knew about nothing about the short sale process, every time I asked him a question he would refer to the listing agent for answers. The only thing my agent did was write up the contract, and list himself as the "buyer's agent" since than I have not heard from him at all. I deal directly with  seller's agent who seems to be running the show from day 1.

Update:
I received the approval letter but its dated to close by October 21st which is impossible at this point. Agent said he would easily be able to get an extension. I am just finalizing my loan, government shut down slowed down my IRS info. I'm in the process of trying to provide that piece of the loan as oppose to waiting for the government to send them.

  • October 17 2013
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Profile picture for 747 Realty
Hello,

Sometimes short sales can be frustrating. However, you being patient is paying off! Even though you have a verbal approval and the actual documents are on their way, moving into a home without closing on it is a very risky. The home is not legally yours until documents are signed and funding has occurred. However, you can do a buyer-lease option, but the owner and lender would have to approve you moving in first. There is a lease document that you can sign that is a TREC form (your agent should be able to furnish for you). Hope this helps you and best of luck!
Traci
  • October 17 2013
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You're contracting with the seller's agent (i.e. the bank's agent) to buy the short sale home, are you also getting your mortgage from that same bank? I hope not!  It was a mistake to not have your own representative. The REA should have told you up from that he/she represents the seller first, not the buyer.
The letter that you have been so patiently waiting for - for all these months - is it the letter of approval from YOUR LENDING bank on your loan? Or is it the letter from the SELLER'S LENDER bank on the Short Sale price? 

BTW - if it is a true Short Sale there is still another seller involved - the home owner listed on the deed. There is no way the REA could have "let you move in during a short sale transaction.

It is very common for a short sale to take 6 MONTHS, and I've seen them take longer than a year.

I think the question you should be asking is (yourself) "why did I hire the banks selling agent?"
  • October 17 2013
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Always best to wait until after closing a short sale to move into the property. The listing realtor does not own the property and had no right to offer the early occupancy. This could lead to a legal mess. Further, there could be real issues with homeowners insurance and it would be an unnecessary risk. Best to talk to your landlord and extend your rental month-by-month until the bank is ready to close. Short sales, like foreclosures, can take a very, very long time to close and it is always unpredictable.
  • October 15 2013
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As a listing agent I would never let the buyer move in before the ink is dry...
So much can happen. I would see that I extend my lease for a month. In hindsight a month is nothing compared to the drama when you are in the house and the deal falls through last minute.
  • October 15 2013
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Profile picture for wetdawgs
Thanks for the update.   I suspect your comment put the fire under them.   (Good for you!).
  • October 15 2013
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Profile picture for Dizaster
I told my REA that I will not be moving in, unless its mine. It seemed that he was able to get a hold of the bank and the will be sending the approval letter tomorrow :) I'm keeping my fingers crossed!
  • October 15 2013
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The bank "moves in mysterious ways".  Pardon the pun but banks do not follow deadlines.  They have their own procedures and red tape to get through.  It is not unusual in a short sale or foreclosure for things to drag on and on inexplicably.

Under no circumstances should you move in the a home prior to the sale being completed.  That is a dumb idea and potentially a legal quagmire.  It should never have been offered. Do not even consider it.

You would need a pre-occupancy agreement signed by the seller and the bank.  In that event you should have an attorney prepare that agreement.

So what happens if you move in and the approval letter never comes?  What if the bank suddenly changes their mind once you are in and now wants more money?  Then you are facing finding another place to live or agreeing to additional terms.

  • October 15 2013
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Profile picture for Dizaster
Thanks everyone for the great advice. I spoke with my landlord, there ok with me staying actually because they have not found anyone to replace me yet :)..... From my side the loan is complete and approved, only thing is the locked in interest rate expires middle of November, is that easy to extend or will I lose the fixed rate?

I am wondering now, if I don't get the letter by November  is wise to back out? I only decided to buy because it was not a bad price. I plan on moving closer to the area regardless because my new job.

If my REA says there is a verbal approval why is it taking soo long to get the letter? Why would someone give a verbal without sending the approval at the same time?
  • October 14 2013
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Moving after you close on the property is the smartest decision.. You just never know what can happen with a short sale between the day you move in and settlement. Protect your best interests, costs of moving and emotional distress by taking a sit and wait approach.
Wishing you the best with your purchase and move.
  • October 14 2013
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I'm not sure what state your are in but In California my understanding if you stayed in the rental place after the end of your lease and your landlord is accepting your monthly payment then by default your are in a month to month lease. To be on the safe side get a written extension of your lease while your waiting for the written approval.
  • October 14 2013
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If it's not in writing it's not anything.  Extend your time in your current place (if you can) and move after closing.  

Another option is to sign an early move-in agreement which would create a lease until closing, but what if funding or bank approval never comes?

But the best advice: if it's not yours it's not yours.  Get it in writing, plan to close on time, stay where you are month-to-month if you can, or move in with somebody short term, if you can.  If you extend your lease by a month and close on a home a week late, you'll lose some money on your rental, but falling behind a little is acceptable in some cases.
  • October 14 2013
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Definitely dont move into the home prior to closing!!!!  The landlord that you currently have should be willing to extend the lease out for a couple of weeks if need be.  Just do whatever you have to do on your end to complete the lending process so that when the bank is ready to close they can simply get it done.  if you are getting a good deal on the house it may just be worth to eat the couple extra weeks in the rental that you are in.  Good Luck!
  • October 14 2013
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Profile picture for wetdawgs
I hope your process moves forward smoothly.

And, again, forget that "pre-settlement occupancy".   Far too many of them end in dizaster.
  • October 14 2013
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Profile picture for Dizaster
I really appreciate your answers in the matter, I was acting out of impulse because I just wanted to be done with this. He did say that he would move me in with a pre-settlement occupancy, not sure what it is yet.

I think I will talk to my current landlord to see if I can extend the lease for a week to a month. Hopefully no one is waiting to move in Nov 1st!

I am hoping I get that stupid approval letter this week and be done! Move in when I own it.  
  • October 14 2013
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Profile picture for wetdawgs
The worst that could happen, it is hard to chose the worst.

The house could burn, be blown away, get washed away or otherwise damaged.  A burglar could break in and steal all the copper.   You could get kicked out and suddenly be held responsible for hundreds of thousands of damages.

If you insist on that course, you need to have renter's and liability insurance and a signed rental contract where you are paying at least fair market rent per day.  You should agree to immediately move (within 24 h)  if the deal doesn't go through.  You should agree to return the house in the same condition as when you moved in (therefore, need a walk through documenting condition of everything before you move in).

If you move in early and discover something doesn't work, you cannot hold the sellers hostage over this discovery.

You cannot simply get permission from your agent and/or the listing agent, but the lender who is going to be shorted needs to give written permission.  If your agent is suggesting that s/he has the authority to approve this, ask the agent to get the written permission of the seller's lender BEFORE spending time coming up with a written rental contract.   Using SoCal's phrase, a "wink wink, nod nod" situation is a great way to start making acquaintance with some expensive attorneys.

Moving in before closing is a very very bad idea.  NO seller in their right mind would approve such a thing.
  • October 13 2013
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Profile picture for SoCal Engr
"What's the worse thing that can happen by moving in? The seller's agent is also my agent, he is really confident about the deal but he says the bank is just slow about getting the letter but its approved."

Worst? House could burn-to-the-ground due to an unknown cause and everyone could look at you for an answer...and you likely wouldn't have any insurance to cover it.

Extreme case? Very unlikely? Yep, but you asked for "worse".
 
The more conservative version goes something like...

Likely, nothing will happen. But, if something does happen, however small, it is likely to not be a good thing. Or, a "clean" thing. And, there is likely to be a lot of finger-pointing...and you're likely to end up "winning" the finger count.

If you move in, will it be under a rental agreement (so the conditions of your occupancy are understood and documented, and you are protected)? Or, will it be a wink-wink-nod-nod arrangement between you and the "very confident" REA?

Personally, I don't trust a RE "professional" that is willing to let you take occupancy of a property that neither of you own, and that the REA likely does not have authorization to approve such an arrangement.
  • October 13 2013
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Profile picture for Dizaster
Well I did give my notice to end the lease but I might be able to extend it.

What's the worse thing that can happen by moving in? The seller's agent is also my agent, he is really confident about the deal but he says the bank is just slow about getting the letter but its approved.
  • October 13 2013
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Profile picture for wetdawgs
Tough situation:

I'd have a heart to heart with all parties related to the sale (listing agent, buyer's agent, lender etc) for probability analysis.

If your lease is up at the end of October, most likely you've had to already give notice that you are not extending the lease.  Are you without a place to live Nov 1?  Is it possible to extend by one month?

I would NOT recommend moving into the property of interest until after closing.   It would be a very very bad idea.    If you have a few days between the end of your lease and closing and then possession, find a friend's couch, rent a hotel room or take a vacation.   Do not think about moving in.

  • October 13 2013
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