Seller in the eviction with tenant day before closing

Newark, New Jersey
Buying & Selling Real Estate
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Seller in the eviction with tenant day before closing

Noyessie Hubert
Member since 2022 · 58 posts · 29 votes

Hi,

I went over all the fight necessary and the expenses to be able to close. 1 day before closing, when doing the last check, my agent ( who is the seller agent ) mentions that one unit is not vacant as requested in the contract. The seller has started the eviction process. 2 unit should be delivered vacant and 2 occupied. Good to mentions that this is Irvington, NJ.


she mentions that the seller should put some amount in the escrow to deal with that. Don’t really understand how it will work and at this point I need a third party point of views.
here are my worries:

  • - what happens if it take 1 year to evict the tenant ? I will be paying the mortgage without being able to get a rent for that. Should I ask the seller to pay that rent ?
  • - What if the tenant trash the place before leaving?

Please any advice. Should I close, if yes with what conditions ? Should I postpone or walk away?

Will be paint full, but at this point, I’m ready to walk away. Too much problems since under contract.

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Adam BartomeoBusiness Member
Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
2y

We normally go one of two routes:

1. We do not close until the stipulations of the contract are met.

2. Take a DEEP discount to take over the headache tenant. 

Honestly, we prefer 2. because we are pretty good at getting the tenants out in a timely manner. This is the route that most sellers want because they will be unable to find another seller until this is done. This is the route that the agent will want also because they are getting both sides AND they will get their commission ASAP as opposed to 6 - 12 months. WIN/WIN/WIN

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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    2y
    Quote from @Noyessie Hubert:

    Hi,

    I went over all the fight necessary and the expenses to be able to close. 1 day before closing, when doing the last check, my agent ( who is the seller agent ) mentions that one unit is not vacant as requested in the contract. The seller has started the eviction process. 2 unit should be delivered vacant and 2 occupied. Good to mentions that this is Irvington, NJ.


    she mentions that the seller should put some amount in the escrow to deal with that. Don’t really understand how it will work and at this point I need a third party point of views.
    here are my worries:

    • - what happens if it take 1 year to evict the tenant ? I will be paying the mortgage without being able to get a rent for that. Should I ask the seller to pay that rent ?
    • - What if the tenant trash the place before leaving?

    Please any advice. Should I close, if yes with what conditions ? Should I postpone or walk away?

    Will be paint full, but at this point, I’m ready to walk away. Too much problems since under contract.

    You allude to other problems, depending on their nature, maybe walk. 

    what is the tenant’s reason for fighting eviction? Is he amenable to cash for keys?


    escrow needs to allow draw down for your mortgage payment ( which means sale went through) less maybe 2 months for vacancy, plus a generous repair allowance. Seller will audit repair claims, and get balance. Escrow should also cover other expenses you incur due to apartment not being vacant. Seller to cover attorney fees for prosecution of eviction.
    0Reply
  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    2y

    @Noyessie Hubert, a few things to consider:

    1. How are your concerns any different than what you might deal with with any other tenant you place in that unit? A new tenant might not pay rent, need to be evicted, do damage etc.

    2. You said there have been "problems" since this has been under contract. Why is that an issue now. Whatever other challenges came up, you have gotten past those. Why back out of a deal because of problems that have already been addressed?!?

    3. Discuss with a lawyer what needs to be done for you to take over the eviction already in process. Make sure any additional paperwork that needs to be filed with the court making you the plaintiff is taken care of.

    4. These are EXACTLY the kinds of property management challenges you are trying to take on by buying a rental property! The question is what is the expected cost both in hard expenses and also opportunity cost.

    For example, if the average scenario is 3 months, $2k in legal fees and $1k in damages and rent is $1k/month that is $6k. I would expect to be getting their $1k deposit at closing to offset damages which leaves $5k. I would want to get MORE from the seller than that in a concession so that I have an opportunity to end up ahead for the extra work, hassle and risk.

    5. I would not want to escrow money for this. That seems needlessly complicated. I would want a concession on the sale price or a seller credit for this so that I can try to end up a little ahead for the hassle and also to keep the deal simple. With an escrow, you may end up arguing with the seller over the cost of fixing damages later on.

    6. Why are you using the seller's agent as your agent? Having your own buyer's agent is important especially in situations like this because a "dual agent" can't help you negotiate this issue or offer guidance because they work for both sides. Too late on this deal, but for future deals, I would always have my own agent. Investment deals are often a little more complicated than deals for a primary residence for reasons exactly like this situation. 

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y

    The answer is simple here. 

    You don't close until the property is delivered in the condition stipulated in the contract,l. Ie, unit delivered vacant.

    Next time, hire your own agent. Of course the sellers agent is looking out for the interest of their client.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    Why is the tenant not leaving?  Do they need extra time to find a place?  Why do you need two units vacant?  As others suggested-cash for keys  (seller can deal with that), have your lawyer (or whoever handles closing) put $X aside so that the seller doesn't get the full amount of the money from the sale until that unit is vacant.  If the tenant doesn't pay rent, then that money comes from those funds.  Not sure how you'd handle the deposit for that tenant.

    As for cancelling the sale-how easy is it to find another place with 4 units?  Lots of stuff happens during a sale and if you are going to have rentals, be prepared for even more problems.

    0Reply
  • Noyessie Hubert
    OP
    Member since 2022 · 58 posts · 29 votes
    2y

    Hi @Kevin Sobilo


    Thanks for your advices. Just adding more context.

    • - I mentions problems. I means issue with the deals. But those are okay and we fixed them all.
    • - We requested the owner to deliver 2 unit vacant ( on 4), and this is also supposed to be my primary residence. Since the owner is not able to deliver the unit vacant at closing and his currently in court with the tenant, I’m asking to know what is the best course of action.

    As a landlord, I understand that I may have to deal with eviction. But I’m purchasing a property and I don’t want to inherit that hassle for free. I’m asking what is the best way update the deal here.

    1Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    We normally go one of two routes:

    1. We do not close until the stipulations of the contract are met.

    2. Take a DEEP discount to take over the headache tenant. 

    Honestly, we prefer 2. because we are pretty good at getting the tenants out in a timely manner. This is the route that most sellers want because they will be unable to find another seller until this is done. This is the route that the agent will want also because they are getting both sides AND they will get their commission ASAP as opposed to 6 - 12 months. WIN/WIN/WIN

    [email protected]239-339-3969
    Bartomeo Property Management4.7150 Reviews
    WebsiteView Page
    2Reply
  • Noyessie Hubert
    OP
    Member since 2022 · 58 posts · 29 votes
    2y

    Hi @Adam Bartomeo and everyone. 

    Thanks for your advices.

    I discuss with my lawyer and we will go for the escrow option. The seller will put some money in escrow for the occupied unit. The amount was based on the possible loss we can incur.

    But we are not taking in charge the current eviction. Not confident that bough I can handle an eviction so soon on my rei journey. The seller will continue, and once done, we will discount the prorated amount and refund the rest.

    Thanks.

    1Reply
  • Mark F.
    Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
    2y

    I'm just curious, why are you investing in Irvington? I assume you know the market well if you're from Newark but again I'll ask, why? It is literally a class D neighborhood. Drug dealers, shootings, etc. If you want to invest in low income, go to Passaic. Still class C but way less drugs and violent crime. I'd say Paterson is better than Irvington but not by much, only by shooting numbers. Less police involved shootings too. Irvington is also Essex county which leans hard to tenants rights. At least Passaic and even Hackensack (bit more $ than Passaic but still a few class C areas left) are not as tenant friendly as compared to Essex county.

    I don't get people investing in the literal hood instead of parts of Passaic and Newark (very specific parts) that are rough but more working class. Good luck on that eviction, I know a good eviction attorney if you need one. Actually I wouldn't do Newark either due to their nutty rent control laws.

    Clifton is good as you can find cheaper, more working class as well and still in Passaic county. Orange and East Orange are probably tempting as they're cheap but again, bordering Class D with crime and drugs. Plus it's Essex being more pro tenant.

    1Reply
  • Patience EchemPro Member
    Member since 2024 · 68 posts · 50 votes
    2y

    I am in agreement with Russell. Please do not allow the seller's agent to sweet talk you into signing for the property unless you have made up your mind to inherit the eviction. Promises that are not written down are none binding. Once you close you may find out that this agent will become unreachable and would have moved on to the next client. This is to say, post-pone the closing until the unit is delivered empty or do it only if you are fine with not getting rent for what may end up being several months. 

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    2y

    How experienced is your attorney - meaning how good is their advice?

    How are you going to remove the tenant?

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