Believe it or not, some distressed duplex sellers have told me they would rather suffer the potential tax consequences and black mark of foreclosure on their credit report than save taxes and lessen credit damage through a short sale.
Because they want to pocket their tenants rent money until the property goes back to the bank.
The irony is, just because you’re selling your duplex as a short sale, or it’s in the foreclosure process, you’re still the owner of the property. As such, you are entitled to all the rights associated with it, including the collection of rent.
That is, unless the bank decides otherwise. See, when you signed your mortgage at the closing where you took title to the property, you likely signed an addendum that said in the event you defaulted, the bank resereved the right to collect rents from the tenants.
But this is true whether you’re being foreclosed upon or doing a short sale.
I’m getting mixed reports from sellers facing duplex short sales. Many are reporting their lender hasn’t requested the rents be assigned to them. Other(so far those who own bigger properties) report that they are.
Until you receive notice from the bank, however, you can use the rental income as you see fit; which may include continuing to pay for the utilities and maintenance of the property, or perhaps even trying to get caught up with the bank.
Of course, if you sell your duplex as a short sale, you will likely be responsible for transferring any tenants damage deposit to the new owner at closing. That money belongs to the new owner.