Let the fun begin

Where do I start? I believe I posted last May/June about the possibility of not being able to keep up our investment property and that we were considering a short sale. We just kept going into the negative every month thinking there would be an end in sight. We kept thinking things would get better.



It is now February. February 26th to be exact. Things did not improve, they only got worse. Not only did my husband's income decline by 75% for the year but in addition, my incentive (bonus) which was nearly 30% of my income completely evaporated on January 1st.



Not a good situation at all.



We made the decision to finally short-sale the home. It has been hugely emotional since then and unfortunately our experience with our tenants has been less-than-pleasant since we made them aware of our decision.



I'm not sure what would be worse, being up front with them about the short-sale and offering to help them through this or if we would have just left them in the dark, planted a "For Sale" sign in the front yard and let them just figure it out on their own.



I guess let me start with the conversation I initially had with our tenants. I spoke with the Mrs. and told her that unfortunately with our situation we had been subsidizing the mortgage by more than half even with their rental income. I also informed her that my income had decreased as well as my husband's income had decreased. She expressed her sympathy for our situation but then informed me that her husband also had lost his job. Not to fear, she told me, they had plenty of income to sustain their housing payment. We agreed that we would come up with a mutually beneficial arrangement for all parties involved considering we may ask them to vacate a few months shy of the lease. We hung up.



During our conversation she told me they had already paid the February rent, although I later discovered that not to be true. She avoided my call for over a week, and when we finally did talk she told me that she had discussed our situation with her friends and she felt a fair amount of rent would be $1000.00 per month.



Keep in mind, the mortgage is $5k per month. They were only paying $2500 of that to start with. Now they generously want to pay us $1000 per month to live there while we are under contract to short-sale? Also keep in mind it costs us approximately $350 per month to maintain the property even though we aren't paying the mortgages, just with the HOA dues, home warranty, sewer, and trash.



I'm angered, to say the least.



She told me that her husband had lost his job and their daughter was going off to college in the fall. They had to pay for a graduation for her and had to buy her a new car.



How the eff is that our problem again?



I informed her that the reason we were still expecting a portion of rental income was because we anticipate they will pursue us for a deficiency. Hey, we aren't stupid. We totally expect we will be on the hook for a portion of this short-sale, given the fact that we are expecting them to take a loss of nearly half what we owe.



She seemed to think that we were going to make out in a positive way from them paying rent and in her mind she seemed to think she shouldn't have to pay any rent if we aren't paying our mortgage.



Well I have news for her. I just finished taking a Business Law class. A contract is a contract. Our contract is with our tenants. They are not contracted between us and our mortgage company. Therefore, our tenants are required to pay their rent and we are required to fulfill the term of their lease. In this case, it would run through August 31st. If they pay their rent (in full) and we do not fulfill the August 31st date then WE would be considered in breach of contract and they may sue us for the actual damages they incur by our breach (ie, unexpected moving expenses, deposits, etc).



We have tried to come to a mutually beneficial arrangement where we will accept decreased rent to help offset their moving expenses, whether we are actually able to keep them there until August or not. The way I see it, if they were able to stay there through August 31st then we owe them absolutely nothing. Under our new rent terms they would have received more than enough money for moving expenses, plus that graduation party they want us to pay for. I feel that is more than fair.



Somehow though, they want to push us. They insist that they should only pay us $1000 or $1250 a month in rent because they don't think that the additional money makes that much difference to us. And, in the grand scheme, it probably won't make that much difference. When we are signing a $30k promissory note for our deficiency, what is $1000?



At this point it's totally the principal of the matter. We have tried hard to be fair to them, knowing that this is unfortunately not within their control. We have been forthcoming and have tried hard to come up with a plan that will pay for those losses they will undoubtedly incur if they have to vacate prior to August 31st. But their adamance that they should get to live in our home for virtually free just because they know we aren't paying the mortgage is driving me absolutely to the brink of anger.



I told my husband tonight that if they don't accept one of our two offers to them by March 1st that I will contact a lawyer and start the process for breach of contract. See, at this stage, we have not asked them to vacate the premises prior to the end of the lease term so we are still fulfilling our obligation (for now). They, on the other hand, withheld their February rent from us and have not agreed to modify their original lease agreement. So if they do not pay their rent in March in full (and by full, I mean $2500) they are technically the ones in breach.



And don't think at this point that one angry Momma Bear won't pursue them for it.



They should have just taken the offer when I first made it.