When having to deal with a short sale real estate transaction, you should never allow a buyer to move in before the process has been finalized. Allowing a buyer to move can be a risky decision for several reasons and we will explore a couple of them below.
Based on my experience, you should not assume anything with a short sale until the offer has been accepted and funding has been approved (all documents have been signed). Although you think you will be helping the buyer out by letting them move in early, there is always a chance your lender will reject the buyer’s offer. We are in a very interesting real estate market currently. This leads to an unpredictable timeframe. Short sales can be very complex and lengthy. Anytime a buyer moves in and occupies the property, this can lead to disputes, legal issues, and potential eviction proceedings.
Who’s responsible for it? Another issue that can arise deals with homeowner insurance. Your homeowner’s insurance may not cover damages related to a tenant residing in the property. You are also running the risk the buyers will have contractors work on the property and then not pay for it, exposing the property to potential mechanic liens. Until the short sale is complete you have the financial responsibility for the property.
Finally, if you do allow a buyer to move into the property, it can hamper your decision moving forward. During the short sale process, your financial situation may change. If your situation changes drastically, the lender might not allow the short sale to be completed or based on the scenario, foreclosure might be a better option.
It should seem obvious that whether it is a short sale or a regular real estate transaction, every seller should complete the transaction before allowing the buyer to work on or move into the property. This helps ensure a smoother transaction while minimalizing potential risks. Regardless of your issues with your real estate transaction, contact us, as we want to help you with your legal issues.