What's the reason banks ask if owner occupies the property or not?

Steele, they have very right to secure their asset when in default, it is in just about every deed I've heard of. If property is vacant they will secure it. THey still will allow owner access, and often, the realtor access, but if they have reason to believe it is being neglected they will change locks. This is not REO. This is short sale.

Thanks everyone for your replies! Very insightful!!

But does it affect the approval (or denial) of the short sale based on owner occupancy?

I think as others have said it depends on the requirements of the particular loan and investor you're dealing with. You will need to ask them. Most banks I deal with and have dealt with have no problems doing short sales on vacant homes, or investment homes, but as some pointed out, it maybe some loans MUST be owner occupied to be considered. However, be careful, it used to be said Countrywide would only grant short sales to borrowers who LIVED in their homes and the advise was don't move out. Well, that is old news so be sure you talk to the bank directly and get the low down from them. You haven't even told us who the bank(s) are... we can't guess what they'll say :) Every bank is different, every investor is different, all the rules change, and they're subject to change at any moment. ANd in fact, they're very often subject to be interpreted incorrectly by the reps at the banks.. so even though the rules may be right , you m ay be told wrong :) So keep trying..

To answer you question, does it affect the approval of denial of selling if owners are still there, and the answer is no. This just tells the bank what steps they will have to take to have owner out for sale to go through.

Ronnie

Thanks Catherine! The bank in this case is Chase but I was told the investor is Bank of America. The owners want to move out this weekend and I wasn't sure if that would affect the approval .... whenever they get around to approving the file that is. It's been almost 9 months since first submitting this file.

You're so right. We're told one thing by one call center rep, and another by another rep the next day we call.

Who are you talking to at Chase. Many start with the Home Preservation Department but nothing gets done until it is assigned to the actual short sale department.

Where are you in the process?

Quoting Catherine Myers:

Steele, they have very right to secure their asset when in default, it is in just about every deed I've heard of. If property is vacant they will secure it. THey still will allow owner access, and often, the realtor access, but if they have reason to believe it is being neglected they will change locks. This is not REO. This is short sale.

Actually it is in the mortgage papers. And you might want to get exact verbiage. The right to secure is NOT based on simply vacancy. There are other factors that must be taken into consideration.

I have done hundreds of REOs over the past 6 years. While lenders were more loose on this policy in the past, today all of them I work with will err on the side of caution before rekeying a property. Again, not just vacant but abandoned is almost always the wording I am given.

I can own a rental that is vacant for two weeks and you don't have any right to rekey it unless it is in danger of damage, unsecured or other major problem. Being in default does not mean the bank owns it....yet.

I could sue you and bring trespassing charges against you in a second. And win.

Make sure it is abandoned or in danger. And be able to prove it. The courts aren't going to cut a real estate agent much slack if a mistake is made.

All I am saying is be careful and make sure there is a legit reason to rekey.

I see what you're saying Steele, but in short sales (at least here), realtors have NOTHING to do with securing of a property in a short sale. The bank gets their property preservation dept to do it. I've had locks changed when the garage was full of my sellers personal belongings, I've had the locks changed with my sign in front and my lockbox cut off the door, I've had locks changed AFTER closing. They do it to secure their interest. Their property preservation depts don't do a ton of due diligence.. if it looks vacant - not in danger or anything else, they will rekey. At least that is how they work here. YMMV

Quoting Catherine Myers:

I see what you're saying Steele, but in short sales (at least here), realtors have NOTHING to do with securing of a property in a short sale. The bank gets their property preservation dept to do it. I've had locks changed when the garage was full of my sellers personal belongings, I've had the locks changed with my sign in front and my lockbox cut off the door, I've had locks changed AFTER closing. They do it to secure their interest. Their property preservation depts don't do a ton of due diligence.. if it looks vacant - not in danger or anything else, they will rekey. At least that is how they work here. YMMV

Thanks for the clarification. My main warning was to agents who are asked to verify if a property is vacant and the bank uses that agent as the source of why they did a lockout.

Here in Minnesota we have a six month redemption. So the danger of major problems to the house are especially there in the Winter (freeze damage). Even so, I have found a number of the lenders very "gun shy" when it comes to rekeying. They usually have us double and triple check.

If a property preservation company rekeys the property and I had nothing to do with it, I am not so worried. And yes, I've seen more than once when they jumped the gun with little or no justification. Then it is the bank's problem.

But the classic case that keeps coming up is a rookie REO agent who for whatever reason sees the house as vacant when it is really just a case of the people are not there at that time. They then convey to the lender that the house needs to be rekeyed. Maybe locking a family out of their house when they just have been gone for a few days.

The extreme case is when that same agent also has that same house cleaned out. I saw one incident where there was the complete "trashout"; furniture, clothing, everything taken and dumped. Needless to say, there was a major lawsuit, not to mention the charge of trespassing.

So that's why I urge caution and common sense when checking to see if a house is truly vacant and abandoned or in danger of immediate damage.

ALL of the above is true, and one thing to add to it. The lender in FL anyway, not sure of your state OWNS the house until the loan is paid off. Additionally, if it is a Fannie Loan, and it is rented, they have incentives to the tenants to either move out (up to $1500 in moving costs). They also give first shot at letting them purchase the house if they wish to do so. It's called "cash for keys" - they want to help out so the tenants who normally don't know about the foreclosure won't damage the house.
It's odd that the house in CA went so long without selling, something not right there. I'd find out if it's a fannie mae, freddie mac loan or Ginnie mae, gov't and get in touch with them. Believe it or not, they give incentives to homeowners who do want to stay in the house if they want to use the O'bama plan (respa would consider this a violation if realtors were to do this!) oh well, that's our tax dollars at work for you.
I wonder why there are two forums on RT about this? I didn't realize this one was here til just browsing around for other groups I may want to join. Why don't you merge them? Or call one REO and let it be only regarding that topic, the other could be short sales?
see the post on the other forum at http://www.realtown.com/DiabloValley/groups/short-sale-strategies/view/16469

Have a great day!