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Ask Dave

Rent It Anyway

Erin bought a condo and didn't realize it had to be owner-occupied and couldn't be rented. It's for sale and is vacant. Should she try to short-sell it or let it go into foreclosure?

QUESTION: Erin in Sarasota bought a condo five years ago, and she didn’t realize the mortgage terms determined it had to be owner-occupied and couldn’t be rented. The condo is in Milwaukee for sale after Erin got married and has been vacant for a while. Should they try to short-sell it or let it go into foreclosure? Dave tells her to go ahead and rent it.

ANSWER: Rent it anyway. Tell them to bite your ankle. If you want to take it, you can take it. If they won’t make any exceptions, then it’s not a problem. Just foreclose on me, because I’m going to rent it. Rent it until you can get it sold. The truth is, there’s nothing that reports to them that it’s rented. If they want to discover it and find it, you’re not going to hide it from them. Just take it. I’m not going to pay the bill anymore. Either a renter’s going to pay it, or they can have it. If they don’t like you renting it, just come take it. You’ll have a foreclosure on your record. It will hold you back from getting another house for three or four years. You’re getting ready to lose the thing anyway. You’ve depleted all of your savings trying to do the right thing.

The idea behind this is a reasonable idea. They were making these loans to individuals as first-time homebuyers. The program is a state bond issue with an FHA backbone under it. It’s a standard thing done in virtually every state. The reason the “no renter” language is in there is they didn’t want people buying these homes on these slightly cheaper-than-market interest rates with a little better terms for first-time homebuyers, and they didn’t want people buying them with the idea they were going to turn around and rent them. They wanted people buying them to be first-time homebuyers. That was your intent. You didn’t set out to do this. Now you’re stuck, and so you’ve got a choice. You’re either going to get foreclosed on or you’re going to rent it and take a chance they get mad and foreclose on it. If the government in Wisconsin is that stupid in this market, they deserve to lose money. I don’t think you’re going to get foreclosed on. I think you’re going to rent it and after six or eight months of renting it, you get a new real estate agent, get the thing back on the market, and sell it.