Taking Possession.If the property is vacant, take possession immediately after the sale – do not wait for the deed to be recorded. If the property is occupied and you got a good deal, sit tight and don’t contact the owner until after the deed is recorded. It is easy for an aggressive owner to get a sale overturned prior to the deed being mailed since all the trustee has to do is return your check. It is much harder for them to rescind, though not impossible, after you get and record the trustee’s deed.
When the property is occupied, if you have the right personality and find it easy to talk to people and make a connection, contact the occupants directly to negotiate their exit strategy. If you do not have these skills you may want to hire someone (possibly a real estate agent) or have an assistant or a spouse with those skills make the first contact.
- Cash for keys. In almost every case a cash-for-keys agreement (C4K), also known as a relocation assistance agreement, is the most efficient way to expedite the departure of the occupants, whether owners or tenants. In a C4K, you offer a lump sum, typically one or two month’s rent, to the occupant to leave the house in good condition in a timely manner, typically two to four weeks. You can provide an incentive by offering an additional payment for early departure, per week. If an owner is reluctant to agree to C4K, point out that it is easier to rent a house with a foreclosure on their record than with an eviction on their record. If they reject the offer and attempt to drag out the process, they will owe you rent from the day you became the owner and will end up with an eviction on their record, as well as a court ordered judgment against them for the rent due if they fail to pay it. There is no question that C4K is the clear and only win-win for both investor and tenant.
- Eviction. C4K notwithstanding, start the eviction process immediately and let the occupants know the clock is ticking. Why? It’s an insurance policy to avoid losing time if they don’t follow through on their part of the agreement. (In California, the eviction process can go up to 90 days or longer.) If the timeline of the agreement goes beyond a couple of weeks, consider getting a stipulated judgment on the eviction so you can bypass the judicial timeline and move straight to filing the judgment and calling the sheriff if they don’t perform. (An unlawful detainer case ends with a judgment from the court. A stipulated judgment is one that is pre-agreed to by the parties.) Eviction laws vary by state and violating them can be costly, so it’s a good idea to use a professional eviction service for your own protection. If the owner answers the complaint and the property is under rent control, hire an attorney. The slightest mistake in evicting someone in a rent control area can be very costly in both time and money.
- Abandoned property. Laws vary by state. In California, if the occupants left property behind, you can dispose of it if it’s worth less than $300. Otherwise you must follow a state regulated process to sell it. The proceeds from that sale can be used to offset the costs of moving and storing it, with the remainder going to the owner, or back to the state if you can’t find the owner.
- Utilities. Do not turn off the utilities on an occupied house. Once the property is vacant, use a copy of the trustee’s deed to establish ownership and have service turned on in your name. You are not responsible for outstanding balances prior to the purchase date.