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We are interested in buying a home that has a Tenant currently in it. The Seller has said that even though there is a lease the Tenant is willing to move out early if the home is sold. We want to live in the home rather than use it as an investment property. Our Realtor has said that we should be protected as long as we have something signed by both the Seller and the Tenant saying that the lease will be terminated at the time of closing. Is that enough of a protection? What are the potential pitfalls and possible solutions to them that we can include in our offer? Any advice would be greatly appreciated!
IMHO, I don't think so. No matter what you have on paper, if a tenant wants to fight leaving, you are going to have to go through your state's required procedure for eviction. If it was me, I'd state in the contract that a condition of closing is that the house be empty at the time of pre-closing walk thru and, if it is not, the deal can be cancelled and any deposit money refunded.
If the tenant is in the house the day you close, you are now the new landlord. If that's not what you want, then make sure the tenant is out, lease is cancelled, and house is vacant beofore you close. Good luck.
IMHO, I don't think so. No matter what you have on paper, if a tenant wants to fight leaving, you are going to have to go through your state's required procedure for eviction. If it was me, I'd state in the contract that a condition of closing is that the house be empty at the time of pre-closing walk thru and, if it is not, the deal can be cancelled and any deposit money refunded.
I agree although I would want to see the tennant out of the house before the walk through as you are planning to move into the house and would need to seek alternative housing if you cancel your transaction. Walk throughs in my neck of the woods are typically done the day of the closing or maybe 1 or 2 days before. You'll want more time than that if you end up cancelling.
I agree although I would want to see the tennant out of the house before the walk through as you are planning to move into the house and would need to seek alternative housing if you cancel your transaction. Walk throughs in my neck of the woods are typically done the day of the closing or maybe 1 or 2 days before. You'll want more time than that if you end up cancelling.
Good point! Might as well give yourself time to come up with a plan B. The most important thing is to make the tenant the seller's problem, not yours.
I agree that the tenants need to be out of the house well before closing. Just an extra note of caution though: tenants can do a lot of damage when moving out--accidentally and on purpose. You will need to inspect the house very carefully once they move out, and be more alert to potential problems than on a normal "walk-through".
I agree with the premise of what has been said so far. I had a similar transaction a few years back involving a duplex where the tenant was vacating and my buyer was going to occupy that unit.
Every state has different laws and contracts but food for thought from me -
Leases survive closing and xfr of ownership because its a right of possession of/to a property. You want to ensure that the lease is both terminated and the tenant is vacated prior to closing. You want to have both written agreement to that, followed up by written verification that its occurred etc. If its not in writing, it doesn't exist. - what is the 'recourse' if they aren't out?... right to terminate... delay closing with penalty to seller? etc... Ideally, you want somesort of motivation for everyone to be out on time.
Return of Security deposit. Often overlooked. IMO, it needs to be addressed too. Since you aren't going to be LL, they won't be handling it at closing... but you want to have, again, written agreement that the tenant's walk thru and return of sec. deposit is done on/before you close. For your protection, and what I did, is to have a written agreement from tenant that any dispute of security deposit is between (them) and the current owner/LL and that any such recourse will be between current owner and not you after the fact of sale etc .... since a lease is actual interest a tenant has upon a property (and deposit is a term of the lease), what I didn't want to have on my hands is the previous tenant have potential recourse and/or lien capability upon my buyer because the previous LL skipped out on their deposit. Maybe overkill and unnecessary and laws differ, but I didn't want to leave it to chance.. because no doubt it could fall back on the agents too.
If the contract has somesort of section/clause regarding possession if the seller fails to provide possession and is to pay the buyer $x until possession is delivered, clarify and attach any presence of tenant and belongings is also subject to that clause/section. My rational is to avoid any arguments over owner vicarious responsibility and that they're out but the tenant is a separate person etc. Again, monetary motivation not to play games. (becomes more relevant if the owner rents a private room of theirs because low and behold, you have a roommate for a month - it happened to a friend of mine! (I wasn't their agent!))
Like someone said... what if damage occurs while the tenant moves out?... Do your walk-thru the morning of closing. A way to address the worst is, if able, escrow proceeds an appropriate amount.. or hold it as a security deposit etc.
We're not attorneys! - but hopefully what we all have said gives insight to what to address with your respective (and legal) professionals!! Its not a risk if its handled appropriately upfront!!
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