Tenant occupying home on second-home. First home in WASHINGTON!

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Hello BP community! 

My husband and I are FINALLY purchasing our first home! It's a single family home in Washington state, and we are in California. It's scheduled to close on 1/28/2020, and we are using a second-home conventional loan because we do not qualify for primary (we're employed in CA and will not be in the home within 60 days of closing, more like 100) and we don't have the capital to put down on an investment loan (we want that extra cash we have saved for the BRRRR, AND need proof of 6 months of payment saved up anyways).

It's an FSBO property and I've been in close contact with the seller for months now, she owns multiple properties in the area and I'd like to say we have a good business relationship at this point... But I'm aware that we're new at this and naive, so I'm being careful, too. She's a lawyer.

Here is the sticky situation:

There are tenants in the home, they've been there for 7 years and knew it was up for sale. We were hoping to be able to have them stay through April, being that we'd get to the area the beginning of May.... It could help us pay the mortgage and give them time to find a new home. They are on a month to month lease with the seller and it sounds rather informal. However, when the appraiser went to look at the home, she found out that there were tenants in there and now the underwriter wants them out BY CLOSING! We can't legally have any renters in there, the seller is thinking about doing a rent-back or lease-back but I don't quite understand it or know if it will work.

Any advice??? Should we just give them the 30 day notice and extend escrow? Can we have them front 3 months rent to us so that they technically aren't "renters" after we close? Caaannnnn.... We do a lease back, and would that benefit the buyer or the seller more? HELP! I don't want to be fraudulent and I also don't want to make someone move ASAP.... But I also don't want a problem with inherited tenants after closing. My emotions tell me to let them stay but reason is what I need to work out here instead. 


A rent back is when the seller agrees to rent back from you,the buyer,  if they can't close on a house and move by your closing. In this sellers case she will rent it to the tenants and give that rent to you at some agreed upon rate. Almost like a  sublet. 

Not sure if the underwriter will go for it since it is more long term. Usually this is an arrangement of days or weeks. You might ask your underwriter what proof they need that the tenants are leaving. If the tenants have a contract on a place with a closing date or a signed lease for a new place would that satisfy them. Otherwise you can change the closing date or find a new lender.