Legal Question in Real Estate Law in California

Re: Short Sale Home Could Include and Eviction

If you buy the house as a short sale, you do indeed take it "subject to" existing leses, so you become the new landlords of the bad tenants. For this reason, you need to know whether they really have a lease, whether they were month-to-month, whether grounds exist to evict them, whether and to what extent rent control will affect your right to evict, and so on. Usually, simple expiration of a lease for a specific period of time is the best basis for removing tenants; their right of possession expires with the lease, and you can begin unlawful detainer proceedings at once.

On the other hand, if you buy at foreclosure, the lease (assuming it is junior in time to the lien being foreclosed) is wiped out by the foreclosure.

One can never be sure, but it might be a better strategy to wait until the foreclosure sale and buy it by bidding at the foreclosure. Keep in mind that foreclosure purchases must be all cash. But the deed you get will be better, and your rights against the tenants perhaps stronger.

If I'm not mistaken, I've answered aspects of this question twice before. If a group of neighbors is indeed in a position to buy this property, you should also be in a position to retain you own legal counsel. I would recommend this, as you have legal issues falling into at least four categories:

1) Local rent control;

2) Short sales and foreclosure;

3) Eviction and unlawful detainer; and

4) Quieting title against the tenants' claims to be owners.

"Quiet title" can be a noun, adjective or verb, but is used quite often as a verb, i.e., I'm going to have to quiet title against those tenants if I buy this house, because they are asserting that they inherited it from their great aunt Lucy." So, you bring a quiet-title suit (adjective), and if you win, you end up with quiet title (noun).

Re: Short Sale Home Could Include and Eviction

You would buy the home subject to all the existing contracts, so it might be a major headache. Unless you think you can buy it at a good discount from it fair market price, why not let someone else assume the headaches. If the tenants are that bad the new owner will try to evict them.

Based upon your zip code, you are either in Emeryville [no rent control] or Oakland [can only evict tenant for very limited reasons under Good Cause for Eviction ordinance]. If the latter, you probably can not evict the tenants.

A short sale is where the lender agrees to allow the house to be sold at less than the amount lent on it, the owner gets that debt cancelled so does not have a negative on his credit record, but normally does not get any money out of the deal. The lender is fully in control of what the terms will be.

Signing a quiet title document merely means that the signer agrees any interest he has in the property is inferior to the person the quiet title is given to. It is often used to basically transfer title but a deed of trust is better.

Remember that in general the amount of rent you can collect on a building usually is not enough to offset the mortgage payments, so if you are going to buy something for investment purposes, you need to buy it at less than the fair market value and/or hope for a significant appreciation in value. it is easy to get stuck with a disaster, especially if it is subject to rent control.