Duplex with tenants

[Lily Tang]

Seattle is known to be tenant friendly so posting questions here to understand from anyone who has insights or experience. There is a duplex with month to month tenants currently occupying. I want to buy to live in one unit and rent out the other as STR.

What are some things I can do in my offer to protect myself in case tenant refuses to vacate and also submit somewhat of a reasonable / good offer? My realtor doesn't seem to agree to ask sellers to give 90 day notice and if there are other offers, I'd have to do that as a buyer. Is that standard in Seattle? What are the chances of tenants refusing to vacate, what is a good way to gauge now or should I submit an offer first with some sort of tenant vacancy contingency? 

[Ke Nan Wang]

I'm a licensed agent in Florida, but if I were using a Realtor to make an offer in your situation, here’s how I would think about it.

First, I assess the worst-case scenario. If I make an offer with contingencies that protect me, and I lose the opportunity to buy—am I okay with that? It depends on how competitive the property is. If it's getting a lot of activity and looks like it might receive multiple offers, then trying to negotiate contingencies that favor me may be pointless because I have no leverage. In that case, I’d probably wait and see if it actually goes under contract. If it does, I probably wasn’t going to win it anyway. But if it doesn’t, I might have a better chance after 30 to 60 days when the seller could be more motivated. Unless I absolutely love the property and can't afford to miss out, I wouldn’t lead with my strongest offer. But if I really want it, then I would put in the best offer I can comfortably afford.

Second, if I’m in a position where I might be the only serious buyer, then I’d take a give-and-take approach. I’d try to give the seller something they value and take something I value. In most cases, price is what matters most to the seller. If I’m financing, price might not be as critical to me, so I’d be more flexible on price in exchange for contingencies that protect me. In your case, that might be a tenant vacancy contingency.

Third, I try to convert every unknown or risk into a dollar amount. I’d talk to an attorney or experienced property manager in the Seattle area about the true cost and timeline of evicting a tenant. Then I’d double those numbers just to be safe. If I still want the property and feel like the seller just doesn’t want to deal with the tenant, I’d deduct that cost from my offer. For example, if I estimate it’ll cost $50,000 to evict, and the property is listed at $1.8M but we had been discussing $1.7M, I might shift gears and offer $1.6M (or even $1.5M) with no contingencies and a quick close once the title clears.

Just some negotiation strategies I usually use.