Bank Changes Locks on Short Sale Property

It’s the second time that this has happened in the last week, so maybe it’s a new trend. Maybe it has happened to you before. I know that I’ve struggled with this annoyance for the last several years; it’s nothing new.

Your short sale listing is vacant or it appears to be vacant because the short sale seller has moved much of his (or her) personal items. Perhaps the closing date is just next week (as in the case of one of our short sales) or maybe it is months away. You or your seller or the buyer or the buyer’s appraiser may go to the property and find that there is a padlock on the front door or the locks have been changed.

If this happens to you, do not panic. This does NOT mean that the bank has foreclosed on the property.

Generally, what happens is that the lenders hire property preservation companies to check in on properties that are many months in default. The lenders are worried about potential vandalism or other liabilities on what may be the lender’s property in the very near future. Because of this, the preservation company makes a snap decision to change the locks, therefore, protecting the property from any potential problems.

What most folks already know is that the lender only becomes the owner of the property IF the property is foreclosed upon and not sold to a third party at auction. (Unfortunately, however, this does not seem to stop anyone from changing the locks.) While it’s not too difficult for a short sale processor to secure the keys or the lockbox combo after the locks have been changed, an owner of the property can probably feel pretty secure if s/he needs to break into their own home. Of course, if you can and are willing to be patient, it may be a lot more affordable to just wait for the short sale lender to mail out the keys.

Has this ever happened to you? What did you do about it? Share your stories in the comments section down below.