selling a rental house (mortgage, lawyer, loans)

[dlgarno]

My house is not selling, and is currently empty. I presented a plan to my realitor to rent my house while on the market. He says it cannot be sold while someone is renting it. Please someone advise me. Thank you.

[jhlcomp]

You can sell the house as long as the buyer understands that it is a rental property and they have to honor the existing agreement. I know many people who have purchased such properties and didn't have a problem using it as investment property and/or rental property.

Still, you need to check around as I may not be legally correct. Good luck to you.

[Prichard]

jhlcomp is correct. There is no reason that someone who is looking for a rental property needs to take it without any tenants. Even if a person wants to purchase a property with tenants in it and use it for their residence, there is no law that would prohibit a seller from selling a rented house to a buyer. The Buyer must understand that he is taking the house subject to whatever lease in in effect. If there is no written lease, then it will be deemed to be a month-to-month tenancy.

The problem comes into play when a Buyer says that he wants the property for investment purposes, but goes to get a conventional loan. On a conventional loan, the Bank can't let you take the property subject to any tenants, because you are getting a lower interest rate based on the fact that you are agreeing to reside there as soon as you close. So, from a practical standpoint, unless the Buyer is paying cash, the bank's lending policies dictates that a house can't be sold as a residence if tenants are living there.

But, you can get a different kind of loan that would let you keep the tenants, if you are an investor - just be prepared to pay more for you loan in terms of points and interest rate.

[riveree]

Originally Posted by dlgarno

My house is not selling, and is currently empty. I presented a plan to my realitor to rent my house while on the market. He says it cannot be sold while someone is renting it. Please someone advise me. Thank you.

I would ask - do you want to be a landlord? It can be fraught with difficulties, even in the short-term while you try to sell your house.

Tenants can do serious damage to a home in a short period of time, often unknowingly or through neglect. I've been through it, as have some of my friends who rent property.

Then there's the great unknown - will they pay rent as promised? This is a stranger after all - who knows what will happen?

I've had the perfect dream tenant and I've had the nightmare tenant.

I'd consider dropping the price of my home before going the landlord route.

[JimKing]

I just read an article yesterday on this very situation. It basically said to rent as a last resort, especially in a market like Florida that is years away from normalcy.

As hard as it is, you would be better off in the long run to lower the price down to where it sells. By renting you have all the hassles of being a landlord, there is a huge inventory of rental homes so tenants hold the cards, and the market is not going to recover anytime soon.

What you consider a big loss now could quite possibly be a much bigger loss in a year or two.

[Mike Peterson]

While in most areas it is not illegal to do this it does make it much harder to sell the home.
In a slow market like we are in putting a renter in could kill any chance of even getting showings.
One option that I have used even on my homes is a lease purchase.
This could be used if you are not forced to sell quickly.
Generally with a lease purchase you can get a larger down payment, with the option payment, than you would with first last and security.
With a nice chunk of money down they are also less likely to trash the house.
So you would be getting a nice down payment, a monthly lease amount and a set price for them to buy with in the year.
Doesn't work for everyone but it is an option.

[Prichard]

I'm not a big fan of "lease-purchases". Some smart tennant and his lawyer will rake a Seller/Landlord over the coals in court, if/when that Landlord tries to evict him. The Buyer will claim that he was really buying the house; that he has equity in the house; that the lease-purchase agreement is really a contract for deed.....and, in Florida "contracts for deed" are deemed to be a mortgage.

So, your little 5 day eviction case will be kicked out of court; you will have to bring a full-blown foreclosure, and meanwhile, the tenant is squating in your property, probably cooking meth, because you thought you were leasing the property. Then you may be paying your dead-beat tenant's attorney's fees because essentially, you lost.

Like some of the others have said, renting houses is difficult. Everything about your lease should be geared toward getting the tenant out as swiftly as the law will let you. Don't fart around with screw-ball leases. If you want to sell the property, just sell it. If you want to be a buyer's bank, then I suppose you can take paper, but again, you will need to foreclose instead of evict. Personally, I've never understood why people take back paper when selling a house, just because they can't get the price they want. Banks make money on 7% loans because they charge junk fees and do it in volume. I wouldn't consider making a $250,000 loan to a stranger unless I stood a chance to make more than a 20% anual return. I could invest that same money in an aggressive mutual fund, have less risk, and not have to do work servicing a loan. Leave lending to the experts - it's a losing proposition for a Seller.