Pay? Not pay? Sue? Not sue? Short Sale mess.........?

[Shelmer]

A friend of a friend rented me her house, saying that she wanted to do a Short Sale. It was the area I was looking for and the size house I wanted, and I was ready to buy a home. I paid her market value rent, and did all the upkeep and maintenance because she was unemployed and didn't have much income. After 5 months of paying rent (we were going to contact the bank to work out the Short Sale contract at 6 months) a Notice of Trustees Sale was put on the door! I called her and asked her what was going on and she said that she had to file bankruptcy, and the house had been in default for almost a YEAR! I asked if we could go ahead with the Short Sale now, and she stated that her bankruptcy lawyer advised her NOT to do a short sale and let the house go back to the bank. She told me that I could work out something with the bank instead, but the bankruptcy would hold off the trustees sale for a while, so please go ahead and keep paying her the rent. What? So now I am living in a house that the Landlord will not do maintenance on, the Bank won't talk to me because the house is not through the foreclosure process yet, and I REALLY needed to purchase a house before the end of the year. Is my only option to go find a different house, cut my losses and have to pay movers again? Any advice or direction is greatly appreciated! Thanks.
I do have loss. I have a written agreement to enter into a short sale negotiation. I moved into this home with the expectation of owning it and I have put in a couple of thousand dollars worth of repairs.

[Smiling]

What's the difference between the short sale, loan amount, and market value?
As you put it, it will cost some money to walk away, so you could consider paying the loan amount (non-short sale).

[Landlord]

You have to pay rent while you live there. There isn't anything to sue over, you are not suffering any loss.

[Iffy]

Walk away and find a house without all her baggage. This house may take more then a year for you to buy

[kckid2]

I don't know why you have to buy a house before year end. Assuming that can be resolved, I think you should just stay there and wait for the bank to get control. You may or may not be able to negotiate a deal, but I can bet they would be very interested in trying make a deal. You have everything to gain by waiting it out.

I'm not sure I would give the current owner another dime however. You will likely have to pay it eventually, but I wouldn't pay her.

[My_Take_on_It]

Your first mistake is fixing up a house that you do not own. That is on you, not on this "friend" of yours. My guess is, the friend would have liked things to work out differently, but knew her situation was dire at best, and at the end of the day, she is going to look out for her bottom line, not yours. Also, just because you entered into a written agreement that she was going to do a short sale means nothing. She has to have permission from her bank to do a short sale, she cannot unilaterally just decide that is how she wants to dump the property. Also, short sales take a lot of time, and most likely, her house would have gone into foreclosure before you would have gotten an ok or heard back from the bank at all.

I would find a new place to buy and get out of this mess. If you do keep paying her rent, be sure you have proof either by a cancelled check or a receipt from her. When the bank does take the house back, they may offer you a cash for keys deal. If they don't, legally you have 90 days to remain in the house paying rent to the bank before you would have to go. But, since you said you wanted to buy a place before the end of the year, I would start looking elsewhere now.