Florida Treasure Coast Real Estate Resource

When it comes to finding a tenant in the competitive Stuart, Florida rental market, flexibility in what you allow can expand your pool of prospective tenants and minimize vacancies. Here are some things to consider when seeking a tenant for your rental property:

Lease Terms

-You may want to allow a shorter lease term or offer an early termination clause (you can charge a higher rent or require a cancellation fee). This works well for corporate transferees and relocating families who plan on purchasing a home. They also can be good tenants as their move is often subsidized or they have cash from the sale of their home.

-Offer a step-up lease for a desirable tenant who is unsure of the rent. A step-up lease starts at a lower rent and increases after a six month period. You may want to include verbiage that the tenant can cancel the lease without penalty at the end of six-months if he is unwilling to pay the rent increase.

-Be flexible about allowing small pets (with an additional pet fee or deposit).

-Allow the tenant to pay the security deposit over a period of several months.

About Credit Challenged Prospects

Due to the loss of a home and other issues arising from this economy, many prospective tenants will have damaged credit. You may want to be flexible on credit standards as many of these people have money and will need a home; it makes sense to try and find a way to work with them.

-Do not let a tenant with a poor credit history spread out his security deposit over several months.

-Be sure to perform a detailed background check.

-Set the ground rules going in. For example:

• The rent is due in full at the first of the month.
  
• The late fee goes into effect on the 4th.
  
• The eviction process starts on the 8th.
  
• If they vacate by the 15th, leaving the unit undamaged and broom-clean, their security will be returned, otherwise you will file suit.

I have been listing rental properties here in the Stuart area since 2003 with few problems. But I have had several evictions over the past year, largely due to the recession. That said, as a landlord it is important that you perform your due diligence and enforce tenant rules.

At first it was those crazy adjustable mortgages that drove thousands of homeowners into short sale or foreclosure situations.  But with the worsening economy, increasing joblessness and ballooning energy costs, many homeowners previously unaffected by the mortgage meltdown are facing similar circumstances through no fault of their own. In an effort to stave off foreclosure and lessen the impact on their credit rating, many distressed homeowners are turning to short sales as an alternative.

What is a short sale? Basically a short sale is when the value of the mortgage is greater than the value of the property. When this occurs the homeowner may opt to sell "short" with the lender accepting less than what is owed on the mortgage.

Homeowners may become eligible for a short sale when they are delinquent on their mortgage payment (usually around two months) and can demonstrate the inability to pay their mortgage. The homeowner is also considered in pre-foreclosure when this occurs and the lender sends a notice of default or lis pendens (a document filed in the public records that notifies any prospective purchaser of property that there is litigation pending that could effect title to the property). A short sale can still take place during the foreclosure process except when the foreclosure is completed and the home is up for auction or the homeowner files for bankruptcy.

While dealing with your lender may seem daunting, working with a real estate professional can help you through the process. You will want to choose an agent who has experience in this area. There are also third party services cropping up that will lend assistance for a fee. Here is an overview of the steps typically required to complete a short sale.

Initiating the short sale will typically require:

1. A hardship letter explaining your circumstances
2. Two months of bank statements (W2, 1099, tax return, etc.)
3. Budget Sheet
4. Authorization to Negotiate (allows your agent to communicate directly with the lender)

Note: the lender will typically have a series of forms for you to complete as well.

Supporting documentation you may need:

5. Broker Price Opinion or Market Analysis
6. Photographs of the home
7. Repair Estimates

Once you find a buyer:

8. Signed Sales Contract with Short Sale Addendum
9. Preliminary HUD-1 (details estimated closing costs)
10. Latest comparable listings and sales

Once you  have submitted your hardship letter and supporting documentation to your lender it's a waiting game.  At this stage a loss mitigation officer may be assigned to your case or it may go into an administrative area until a buyer is procured or foreclosure occurs. While waiting for the lender's approval, your agent will list and begin marketing the property (note: some lenders will not approve the short sale until a contract is pending). Once a buyer is found and the sales contract submitted for approval your agent will keep the process moving along with follow up calls to the loan mitigation officer.

Short sales are a challenge at best and the requirements differ from bank to bank, but lending institutions are finally beginning to respond proactively and are working in tandem with real estate professionals to speed the process. As this is being written legislation is underway that may ease the process and offer alternatives to short sale or foreclosure.

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Disclaimer: the author does not assume any responsibility for any errors, omissions or contradictory interpretations of the subject matter contained herein. The information provided is for reference purposes only and is not intended to be used as a source of legal or accounting advice.