Is it a risk to rent a condo which is under Short Sale?

The honest answer for this question is – it depends. A Short Sale property is like any other normal property, and the only difference is it is facing foreclosure, but still in possession of the present owner. The sale of the property will have to take place, with the consent and approval of the mortgage lender, who holds the mortgage deed on it. What are the risks?

Renting a condominium, for example an attractive one in the water-front of Naples, Florida, is most-preferred by many families. In the normal course, you will have to enter into a rental agreement with the owner. This agreement contains normal clauses of renting, as stipulated under the laws, customs and usages of the area in question etc. specifying mainly the obligations and responsibilities of both the parties.

Because you know prior to renting the condo that the property is under Short Sale, and the sale deal will be finalized soon – since the property is in Naples and that too in a water-front neighborhood – the very first question is whether the new owner, meaning the buyer through Short Sale, will allow the rental lease to continue or not.

This point should be categorically cleared first, and it is advisable to add a specific clause in the rental agreement about the future of the renter, in continuing occupation of the condo in question or not. Normal practice is when a property changes hands; the new owner will ask the renters to vacate, as any hike in rent is not possible with the old renters, obviously.

If the property is taken vacant possession, the opportunities are wide open for the new owner – from deciding upon who the renter is to what amount they should pay as rent etc.

The next risk is about your rental deposit – you should know with whom the amount will be lying – the present owner or the new owner. It cannot be expected that when the property is sold, the present owner will honestly hand over the rental deposits to the new owner, even if the new owner agrees for the continuation of your lease.

So if you are prepared for the risks – mentioned above and more – you can go ahead with renting a property under Short Sale.

Posted by Amitesh Kumar on Aug 6 2010. Filed under Short Sales. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry