Unbelievable (sort of OT)

[urbanrealtor]

This is sort of a Rant and Rave topic.
I am basically posting here to rant about real estate professionals that just offend me with their conduct.
But feel free to go off about whatever.
Just as long as its not like “I hate republicans because they are facists” (you know who you are Brian).
I prefer complaints that are specific in their focus.
I am starting this because I have recently witnessed some truly impressive ethical fails.

[urbanrealtor]

So here is a big one.

I was listing a condo for a short sale.
It was a nice townhouse with 3br/3ba and a 2-car garage and an atrium.
Nice place.

Unfortunately, the bank (BofA–originally CWide) sold the note during the most recent round of profit panics. They sold it for half of face value.
So:
Loan: 370k
List price: 250k (which is low but I needed offers fast to avoid the repo)
Market value: Probably 275k-325k
Contract price: 250k (buyer knows it probably will get bumped up by the bank)
sale price of the (non-performing)note when purchased by BNY-Mellon (which sounds like “boney melon”): $180k

So midway through the short, the BNY-M cancels the short and just puts it up for auction.

That is actually not my complaint.
Its frustrating but shit, life goes on.

Investors buy it for $212k on the courthouse steps.
I am impressed at their determination and acumen in accomplishing this.

Then, the problem.

They first ask me if I have any buyers for the property.
They are Realtors and trying to get money out of it asap any way they can.
The previous buyers are not interested.

And here is where it gets fucked up.

The new owners show up at the property pounding on the door.
They demand rent or keys.

Thats illegal.
On a personal note it really pisses me off when Realtors act like thugs and try to deprive people of their rights.

So here we are now:
I have actually paid for an attorney for these tenants.
The landlords have shown up multiple times with notices or new rental agreements they want the tenants to sign.

They have threatened to evict them if they do not sign and pay.

This is despite the 2009 federal tenant protection law.

Fucking unbelievable.

[equalizer]

[quote=urbanrealtor]So here is a big one.

I was listing a condo for a short sale.
It was a nice townhouse with 3br/3ba and a 2-car garage and an atrium.
Nice place.

Unfortunately, the bank (BofA–originally CWide) sold the note during the most recent round of profit panics. They sold it for half of face value.
So:
Loan: 370k
List price: 250k (which is low but I needed offers fast to avoid the repo)
Market value: Probably 275k-325k
Contract price: 250k (buyer knows it probably will get bumped up by the bank)
sale price of the (non-performing)note when purchased by BNY-Mellon (which sounds like “boney melon”): $180k

So midway through the short, the BNY-M cancels the short and just puts it up for auction.

That is actually not my complaint.
Its frustrating but shit, life goes on.

Investors buy it for $212k on the courthouse steps.
I am impressed at their determination and acumen in accomplishing this.

Then, the problem.

They first ask me if I have any buyers for the property.
They are Realtors and trying to get money out of it asap any way they can.
The previous buyers are not interested.

And here is where it gets fucked up.

The new owners show up at the property pounding on the door.
They demand rent or keys.

Thats illegal.
On a personal note it really pisses me off when Realtors act like thugs and try to deprive people of their rights.

So here we are now:
I have actually paid for an attorney for these tenants.
The landlords have shown up multiple times with notices or new rental agreements they want the tenants to sign.

They have threatened to evict them if they do not sign and pay.

This is despite the 2009 federal tenant protection law.

Fucking unbelievable.[/quote]
For those who are not familiar with rental laws, Do they have a rental agreement from the bank? If not, then don’t they have to leave? What does 2009 law state? Thx

[urbanrealtor]

Yeah sorry.

The 2009 law said that someone who gets the property on the courthouse steps (the bank, an investor, FannieMae) has specific requirements in how they treat the tenant.
They are required to either respect the existing lease (by creating an identical lease with their name) or to give a 90 days notice to vacate to the tenant.
There is no provision to charge those tenants rent during the 90 days (its not quite that simple but that’s what it boils down to).

That is why every bank pays giant scary law firms (like Wolfram & Hart or Pite Duncan or Morrison Forrester) to offer a contract to decide if the tenant wants 90 days or $5000 to move out in a few weeks.

This law does not extend to former owners, but usually a bank does not care that much who is occupying and will treat any occupant as a bona fide tenant.

The Realtor-Investor-Landlord-Douchbags obviously have not researched this at all and are trying to intimidate the tenants.

And yes, I know that Wolfram and Hart is not real.

[all]

Isn’t there a non-profit that is supposed to assist the tenants?

But don’t the tenants have to pay the rent, since the new owner has to honor the current lease until it expires (or 90 days)? My impression was that in reality banks don’t collect rent because they do not want to be landlords, not because the law forces them to forfeit.

[urbanrealtor]

[quote=captcha]Isn’t there a non-profit that is supposed to assist the tenants?

But don’t the tenants have to pay the rent, since the new owner has to honor the current lease until it expires (or 90 days)? My impression was that in reality banks don’t collect rent because they do not want to be landlords, not because the law forces them to forfeit.[/quote]

I actually went over this with a couple of different attorneys.

At a literal level, the tenants are not excused from rent.
However, collecting rent requires the voluntary adoption of a new rental agreement.
There is no requirement for the tenants to adopt such an agreement.
If they choose not to, then they can be served with a notice to quit.
A 90-day notice.
If the tenant pays rent, then they can be credited for rent they have paid.
In this case, they had paid rent on the 15th (their normal day) and the property was foreclosed on the 17th.
Further, if the landlord asserts that the tenants are bound by the old lease, then he is also bound to it.
That is a dumb idea because it can mean that the landlord owes them the deposit based on the terms of that lease.
Accepting rent creates this relationship.

So, again, there is no real way for the landlord to have it both ways.
Either they are landlords with tenants or they are successors in interest with holdover occupants.

And yes there are non-profits that help with this.
But I wanted them to have the benefit of a legal bulldog.

[recordsclerk]

In your scenario I think you should ask the original owner to return said deposit and refund 28-29 days worth of prepaid rent. There is nothing wrong with collecting rent while not paying mortgage, but collecting rents beyond your ownership and not refunding deposit is crap. I still don’t see your point that the new owners are bad people because they want rent from tenants that live in their property. They should credit them this month’s rent, but starting next month rent should be paid. If the home would have been sold through the short sale process, would this not be the same outcome for the tenants. Why is this scenario any different? If the new owners want the tenants to leave quick, the tenants should be paid a fair amount (cash for keys) to leave quick.

[urbanrealtor]

[quote=recordsclerk]In your scenario I think you should ask the original owner to return said deposit and refund 28-29 days worth of prepaid rent. There is nothing wrong with collecting rent while not paying mortgage, but collecting rents beyond your ownership and not refunding deposit is crap. I still don’t see your point that the new owners are bad people because they want rent from tenants that live in their property. They should credit them this month’s rent, but starting next month rent should be paid. If the home would have been sold through the short sale process, would this not be the same outcome for the tenants. Why is this scenario any different? If the new owners want the tenants to leave quick, the tenants should be paid a fair amount (cash for keys) to leave quick.[/quote]

The scenario is different because the law is dramatically different and the type of sale is dramatically different.
In a normal sale or in a short sale, there is a process by which the tenant’s deposit is transferred to the custody of the new owner as is the already-paid rent.
That usually is not a separate check or anything.
Its usually just an additional line item on a closing statement or just a contract addendum stating that “x-dollars are credited to tenant’s ledger for deposit and y-dollars are credited to cover rent through (random date)”.

That’s fine.

However, in a foreclosure, the lease/rental agreement is wiped out.
It ceases to exist as does the mechanism tying the payment to the detainment of the property.
So the money spent no longer actually pertains to any use of the property.
It just becomes money owed by the (former) landlord to the tenant.
The tenant’s only recourse to recover this is to ask or to pursue collection activities (like a lawsuit).
Suing a person who just lost a house in foreclosure is not a very fruitful endeavor.
Ask any HOA president (I am one).
What was happening for a few years was that the deadbeat homeowner would rent out a home and include the maximum legal deposit (3x rent in CA).
Then they would get foreclosed upon with a debt owing to the tenant of 3-4 months worth of cash (deposit + rent already paid).
This was usually followed by bankruptcy.
The end result was very often a tenant who was now totally broke and homeless with their only solution to be a petition to the bk trustee.
I had one client who had this happen 3 times as a tenant (which was why she was buying).
As a way to avoid more bankruptcies by tenants (which were surging) and lawsuits that followed, the federal government created the 90 day rule.
The notice to quit (called the notice to vacate or the eviction notice) had to be 90 days and any new rental agreement had to be voluntary.

Cash for keys refers to the new landlord (bank or investor) basically bribing the tenant to move early.

And I don’t think there is anything wrong with that.

In fact the landlords that were the subject of this rant just offered a hefty sum to make this problem go away.

My only issue here was the violation of the 90-day rule and the standards of practice.

[SD Realtor]

When we were doing our flips the most dicey thing was dealing with tenants who occupied properties that we purchased at auction. The laws that protect the tenants are pretty straightforward and are exactly as you stated.

You can correct me if I am wrong, but if I recall correctly, if the tenants have a copy of the previous lease, the new owners are indeed bound by that lease assuming it is a bona fide lease. There are several caviots defining that, primarly when the lease was generated in relation to the notice of trustee sale, as well as if the rent is market rate.

As you said, the general way to go about an eviction, (and if the lease is bona fide, and the tenants pay you the new landlord then you cannot evict until the lease term is up) is to go about it through the formal process as you explained above… Many newbee types in the flip game don’t understand the rules and try to bully tenants when in reality the tenants have alot of power if they know how to use it and can get a nice payout if they are positioned well by a pre-existing lease.

***********

I do have a great ethical story for you as well but it was not my transaction. Knew of a guy in a short sale. He had crappy representation. There were two loans… the second wanted 2500 from the buyer PRIOR to sending formal acceptance. Realtor didn’t know better and allowed him to do it however they waited until the last minute, sent the money in and the home went to foreclosure… that is not even the bad part…

The listing agent was using a third party short sale processor who worked for a broker. Another agent for THAT broker ended up buying the home at trustee sale. The original buyer who lost the 2500 ended up buying the home from the realtor who bought it at trustee sale for a little more then what they had it for during the short sale.

Unreal man…

[urbanrealtor]

The issue with a bona fide lease is whether it was created before the “notice of foreclosure”.
That term is kind of confusing for CA.
Some banks define that as the date of the NOD, some as the date of the NOT, some as the date on the original note (not kidding).
HUD finally weighed in and clarified that the “notice of foreclosure” occurs when there is a clear winner of a trustee auction.

In other words, the repo date.

You can’t create a bona fide lease after the house is no longer the ex-landlords.

[zk]

[quote=urbanrealtor]
And yes, I know that Wolfram and Hart is not real.[/quote]

But the law firm you really have to fear is Dewey, Cheatham, and Howe.

[CDMA ENG]

Quality post guys…

CE

[urbanrealtor]

[quote=SD Realtor]

I do have a great ethical story for you as well but it was not my transaction. Knew of a guy in a short sale. He had crappy representation. There were two loans… the second wanted 2500 from the buyer PRIOR to sending formal acceptance. Realtor didn’t know better and allowed him to do it however they waited until the last minute, sent the money in and the home went to foreclosure… that is not even the bad part…

The listing agent was using a third party short sale processor who worked for a broker. Another agent for THAT broker ended up buying the home at trustee sale. The original buyer who lost the 2500 ended up buying the home from the realtor who bought it at trustee sale for a little more then what they had it for during the short sale.

Unreal man…[/quote]

That is very fucked up.

On the bright side, the original buyer got the property they wanted….Eventually.

[SD Realtor]

Yes the buyer did get the home which was good. On the flip side the broker for the short sale negotiator was a slimeball.

[briansd1]

[quote=urbanrealtor]
Just as long as its not like “I hate republicans because they are facists” (you know who you are Brian).
[/quote]

I never said such thing, ever, so please don’t put words in my mouth. BTW, I have pretty thick skin and I’m not offended by your comment.

I think that my comments are generally pretty fair and balanced.

Did you not notice that, since I started responding tit-for-tat, the rants from the other side have stopped.

Rahm Emanuel is my hero. I believe in having a conscience and certain degree of moral high-ground, but I also believe in getting tough when needed, and having some fun at it.

You can’t neutralize Fox News with just PBS and Paul Krugman, you need some Jon Stewart, Bill Maher, and some much heavier guns, I’m afraid.

[quote=urbanrealtor]I am basically posting here to rant about real estate professionals that just offend me with their conduct.[/quote]

About Realtors, there are good and bad ones.

It’s about the incentives.

I beleive that in any profession that is commission based, or where compensation is based on short term events, then you will have ethical lapses. That’s just part of the game.

[Author]

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