Massachusetts, MA · Member since 2009 · 144 posts · 31 votes
I'm selling my home (owner occupied investment property) and my buyer just found out they can't close on time as planned. They asked for 2 additional weeks before the closing. I proposed we go 4 weeks instead as then I'll have owned the property for year 1 day and I will save on taxes. She asked if she can rent from me until the closing now slated for oct 30 (53 days away).
This is my first time doing this, any advice? All I have asked for is that she can't move in until I have a mortgage commitment from her. Anything else I can do to protect myself in case she can't get funding, or decides she doesn't want to buy it, and not move out. I need to sell it, I can't afford to rent it out.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
I can't think of any situation where I'd let a buyer move into a move-in ready home of mine prior to closing.
If for some reason the property doesn't close, the best case is that I have to wait for them to voluntarily move out, will have to touch up the paint, clean the carpets they messed up, clean the toilets/sinks/showers, and fix the nail holes in the wall. Worst case, I have to get them evicted, fix everything they broke, get the house repainted, re-carpeted, etc.
The only way I would consider it is if they were will to give me a non-refundable deposit that would cover all the basic cosmetic repairs (painting, flooring, cabinets, etc). This would be about $8000 on a typical property and would go towards closing if the property closed and would be lost (to me) if it didn't.
Even then, I wouldn't be very comfortable doing this...
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
I can't think of any situation where I'd let a buyer move into a move-in ready home of mine prior to closing.
If for some reason the property doesn't close, the best case is that I have to wait for them to voluntarily move out, will have to touch up the paint, clean the carpets they messed up, clean the toilets/sinks/showers, and fix the nail holes in the wall. Worst case, I have to get them evicted, fix everything they broke, get the house repainted, re-carpeted, etc.
The only way I would consider it is if they were will to give me a non-refundable deposit that would cover all the basic cosmetic repairs (painting, flooring, cabinets, etc). This would be about $8000 on a typical property and would go towards closing if the property closed and would be lost (to me) if it didn't.
Even then, I wouldn't be very comfortable doing this...
Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
15y
You also need to consider whether by moving out, you would be violating the provision by which the IRS allows you to save on taxes. In other words, if you didn't actually live in it for the entire required time period.
And the headaches of getting rid of her as a tenant if she can't close her loan are too long for the time I have for this post.
I'm with J Scott. Don't do it. Come up with some other offer that can solve her problem.
Residential Real Estate Agent · Mt. Pleasant, SC · Member since 2010 · 257 posts · 130 votes
15y
I wouldn't do it either, except in extreme circumstances. More than damage or non-payment, I'd be worried that they would decide they didn't like the house and that would give them a chance to back out. Then I've had it off the market for 60 days. I think that's riskier than what you'll save in taxes, if anything.
If they're already in a lease and can get it extended, maybe you could offer to reimburse them (at closing only) for the extra 2 months rent in their current place.
Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
15y
Also, in order to get the tax benefit, wouldn't you have had to live in the house for two years, not just one year? I thought the one year benefit was only if you were using the house as a rental, and I doubt renting it out for a month or so at the end of that one year period would hold up to IRS scrutiny. If I am incorrect about either of these things, I hope someone will point it out here.
Involved In Real Estate · Denver, CO · Member since 2008 · 11 posts · 2 votes
14y
I didn't read the whole thread on here, but I had a situation where I suggested to my client - landlord/seller - that she consider allowing the buyer to move into her condo unit a week prior to close. The reason being is that I discovered that the 48-unit building was being scrutinized heavily by a litany of lenders that the buyer tried to enlist to get financing, only to have each lender deny the loan based on their own unique criteria. The buyer had good credit and 10% down ($200k sale price), but the MI companies and the banks were denying the loan based on their own definitions of owner-occupancy ratios and retail ratios. There is a whole second layer to this story, but the bottom line is that I sensed that most lenders - non-warrantable included - were going to have an issue pushing an approval through. Currently, the failed buyer lives in the unit and pay rent month-to-month. The seller is going to relist in 2012 after the holidays.