Seller won't hand over property vacant, Red Flags?

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Seller won't hand over property vacant, Red Flags?

Ryan Pearson
Costa Mesa CA · Member since 2020 · 19 posts · 8 votes

I just went under contract on a row home property in Philadelphia. It's a 3 bedroom 1 bath SFH with current tenants paying on a month to month lease. Seller is requesting cash offers only and 30 days or sooner on closing. In the original offer we requested for the seller to provide the property vacant at closing. The listing agent got back to us saying "serving vacant would be a deal breaker". Owner has verbally said to our agent that the current tenants are up to date on rent. I'm assuming the seller is apprehensive that serving vacant could delay closing? Other than that I don't understand why the seller would not want to provide vacant at closing. I even requested permission and reached out to the current tenant to get more details but have not received a response. Does this give off any red flags to anyone? Does anyone have any advice on what we can do to protect ourselves in this situation? My biggest concern is that we get the property and the tenants refuse to leave after terminating their rental agreement. I appreciate any advice.


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Karl B.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
4y

Perhaps the seller doesn't want to remove the tenants and then have to deal with having an empty rental property in the event the closing doesn't go as planned. 

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  • Michael J.
    Real Estate Agent · Greenville, SC · Member since 2021 · 210 posts · 142 votes
    4y

    Since they are on a month to month lease, if you really want the property, take possession at closing and then give the tenants the appropriate notice to vacate the property.

    3Reply
  • Michael J.
    Real Estate Agent · Greenville, SC · Member since 2021 · 210 posts · 142 votes
    4y

    To follow up, Ive had sellers tell me they won't sign a contract and sell to me if I didn't promise to not kick the tenants out.  Once you own the property you can do whatever you want with it. 

    1Reply
  • Solomon Morris
    Rental Property Investor · MD · Member since 2018 · 287 posts · 205 votes
    4y

    "Deal breaker" huh? Seems like a red flag to me.. Can the seller provide rent rolls for the tenant(s)?  

    3Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    4y

    Perhaps the seller doesn't want to remove the tenants and then have to deal with having an empty rental property in the event the closing doesn't go as planned. 

    16Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    4y
    I wouldn't kick my tenants out either. You want them gone, that's your job as the new owner. If you want the current owner to, up your offer $20k. 
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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    4y
    Originally posted by @Russell Brazil:
    I wouldn't kick my tenants out either. You want them gone, that's your job as the new owner. If you want the current owner to, up your offer $20k. 

    ....or accept it with the tenants in place, but lower your offer by $20k.

    6Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    I would never kick out paying tenants because you SAY you’re going to buy it. I don’t think any seller would.

    You want it empty. Write a check for 6 x the monthly rent that the seller gets to keep if you back out but goes toward the purchase if you do close. That’s the VERY least I would accept to kick out paying tenants. If you plan to buy it costs you nothing. If you flake as the seller suspects then they have 6 months to find a new tenant or a new buyer. 

    What’s the purpose of kicking out the paying tenant? Confirm they are paying with bank deposits. Confirm they are month to month with estoppel from tenants. After you own it do what you want. But I bet you agree, you wouldn’t kick someone out of your rental just because someone wrote you an offer with 5 contingencies and no consequences for backing out. 

    7Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    4y

    @Ryan Pearson The seller probably doesn’t want to deal with removing them, or wants to avoid a situation where they get the property vacant and then the buyer backs out on them at the last second leaving them with no buyer and no rental income. Or what if the tenant refuses to leave upon receiving notice, stops paying rent at that time and their relationship with the owner sours, they end up being forced to evict. In that neck of the woods I believe evictions are expensive and take a long time, which doesn’t incentivize the tenant to leave within your contract period if they don’t want to, and could potentially hurt the owners timeline and ability to sell the property. Also not sure what the circumstances are here exactly but a buyer reaching out and attempting to communicate directly with the tenants wouldn’t go over well with most sellers in my experience. It’s a free country and you can contact whoever you want of course, but I wouldn’t advise reaching out to tenants until you own the property. I would have the listing agent provide current leases, rent roll, and estoppels from the current tenants and maybe do some research on them once you have their info from the leases. Estoppels should ask the question “are you current on rent?”. You could also ask for trailing 12 months/ profit and loss/ bank statements/ tax info from the seller to verify the property performance, but not every seller will want to provide all that. Maybe you could also ask for their rental applications too if the seller still has them. Having a seller agree to deliver a property vacant is not that common. Not in this market anyway. Why do you want it vacant? I like the idea of lowering your offer a bit if the seller doesn’t want to deliver it vacant, but unless they’re highly motivated to sell (which could be a red flag) they’ll probably just say no. Do you know if the seller has any backup offers?

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Originally posted by @Karl B.:

    Perhaps the seller doesn't want to remove the tenants and then have to deal with having an empty rental property in the event the closing doesn't go as planned. 

    Absolutely correct.. vacant home is a target for squatters  thieves etc.  Seller would be nuts to take a rental and make it vacant prior to closing unless the buyer put up the entire purchase price as none refundable EM thats the only way i would kick out a paying tenant in what is a rental area..   Now if this was a owner occ area with low crime not many tenants etc and you were moving in.. I get that .

    but not a rental suicide and high risk for seller..  buyer is in CA may not understand the risks.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Originally posted by @Bill B.:

    I would never kick out paying tenants because you SAY you’re going to buy it. I don’t think any seller would.

    You want it empty. Write a check for 6 x the monthly rent that the seller gets to keep if you back out but goes toward the purchase if you do close. That’s the VERY least I would accept to kick out paying tenants. If you plan to buy it costs you nothing. If you flake as the seller suspects then they have 6 months to find a new tenant or a new buyer. 

    What’s the purpose of kicking out the paying tenant? Confirm they are paying with bank deposits. Confirm they are month to month with estoppel from tenants. After you own it do what you want. But I bet you agree, you wouldn’t kick someone out of your rental just because someone wrote you an offer with 5 contingencies and no consequences for backing out. 

    Bill in these rental areas and I am speculating but having funded in these rental areas of Philly Balt  Cleveland Detroit etc. 

    its common for turnkey rehabbers to want a property vacant before I fund it for them..  But this is always a non paying tenant squatter situation and a burnt out landlord or lender in possession situation.. 

    If this is a bona fide paying tenant and I am again assuming this is a rental dominated neighborhood with all that comes with it in these areas then as I said it would be absolutely stupid for the seller to kick out a paying tenant for all the reasons you suggest. The risk that the house gets vandalized mechanicals all stolen appliances all stolen is way to great for all parties to take a performing paying tenant and make them leave.. This risk should be born by the Buyer after they own it.  Not before.  

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  • Scott M.
    Real Estate Broker · Rochester Hills, MI · Member since 2009 · 2k+ posts · 2k+ votes
    4y

    Not even close to a red flag.  The answer is in your original post.  You said "Seller is requesting cash offers only and 30 days or sooner on closing".

    That is your answer.  Seller can't guarantee he can get someone out in 30 days.  He could request it (read on) but he can't guarantee it.  So the seller has to decide on what is more important.  Your wishes or theirs.  Clearly their desire for a 30 day close is more important to them.  

    If you want the tenants gone you should do just what you did, ask and make it part of the deal.  Doesn't mean the seller is going to accept that though.  You now have a choice.  1) Pass on the deal because it doesn't meet your criteria or 2) Accept the seller counter.  3)Counter their counter etc.....

    As a seller, I would be hesitant to get rid of a tenant for a buyer because if that buyer backs out then I am stuck with a property that isn't cashflowing.  

    No red flags to me.  Do the proper due diligence if you decide to keep them.  Then you can ask them to leave, offer them cash to leave, evict them etc....when you take over.  

    Can't expect every buyer to bend to your will.  Some will, go find that deal.  

    8Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    Having it vacant is good for you, but a risk to the seller if it doesn't close.  If they won't deliver it vacant, then state that as the current tenant is month to month no changes are permitted to the current lease.  This will prevent them from signing the tenants to a year long lease at a lower rate or something similar.

    Are you planning on moving into the property or using it as a rental?  If you need to move in, then tell them it is a deal breaker for you as well or offer a larger deposit.

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @Michael J.:

    Since they are on a month to month lease, if you really want the property, take possession at closing and then give the tenants the appropriate notice to vacate the property.

     He's in California, so that may be harder than we would think.....

    0Reply
  • Ryan Pearson
    OP
    Costa Mesa CA · Member since 2020 · 19 posts · 8 votes
    4y
    Originally posted by @Steve K.:

    @Ryan Pearson The seller probably doesn’t want to deal with removing them, or wants to avoid a situation where they get the property vacant and then the buyer backs out on them at the last second leaving them with no buyer and no rental income. Or what if the tenant refuses to leave upon receiving notice, stops paying rent at that time and their relationship with the owner sours, they end up being forced to evict. In that neck of the woods I believe evictions are expensive and take a long time, which doesn’t incentivize the tenant to leave within your contract period if they don’t want to, and could potentially hurt the owners timeline and ability to sell the property. Also not sure what the circumstances are here exactly but a buyer reaching out and attempting to communicate directly with the tenants wouldn’t go over well with most sellers in my experience. It’s a free country and you can contact whoever you want of course, but I wouldn’t advise reaching out to tenants until you own the property. I would have the listing agent provide current leases, rent roll, and estoppels from the current tenants and maybe do some research on them once you have their info from the leases. Estoppels should ask the question “are you current on rent?”. You could also ask for trailing 12 months/ profit and loss/ bank statements/ tax info from the seller to verify the property performance, but not every seller will want to provide all that. Maybe you could also ask for their rental applications too if the seller still has them. Having a seller agree to deliver a property vacant is not that common. Not in this market anyway. Why do you want it vacant? I like the idea of lowering your offer a bit if the seller doesn’t want to deliver it vacant, but unless they’re highly motivated to sell (which could be a red flag) they’ll probably just say no. Do you know if the seller has any backup offers?

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    4y
    Others have posted the obvious. If it's 30 days or sooner, there is no way to legally give proper notice to evict tenants within 30 days. You do have the right to see the landlord/tenant agreements in place, etc. and know if the current tenants are current on rents. It's CA and laws are in favor of tenants.  I'd be surprised if the title company can do escrow/title within 30 days in CA as everyone is so backed up. 
    1Reply
  • Ryan Pearson
    OP
    Costa Mesa CA · Member since 2020 · 19 posts · 8 votes
    4y

    @Steve K.I'm asking to have the property handed over vacant because I plan to do a full gut rehab and would like to start work ASAP after closing. I'm offering a 5K deposit which is equal to about 6 months rent. From my perspective it seems like minimal risk for the seller as he would have 6 months rent covered if for any reason I backed out. In this area properties sold vacant with clear pictures of the inside seem to sell much quicker and sell (sell in 1-2 week) for 10K-15K more than properties sold with tenants and no interior pictures. I have no problem removing the tenants myself just trying to understand why a seller would not remove the tenants themselves to get a quicker sale and make an additional 10-15K. I would rather take the property for a discount and remove the tenants myself but just trying to make sure I don't end up with an eviction that delays my project and locks up my capitol for 2-8 month. I already tried offering 5k under asking price and it was rejected with no counter. The seller does have at least 1 backup offer. I like your suggestion to request rent roll and profit/loss bank statement to verify property performance. I really appreciate your feedback.

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    4y

    @Ryan Pearson you're still not getting it. The landlord can't legally agree to hand you over a vacant house no matter how much of a bonus you give him. The tenants have to be noticed and evicted.  What you could do is offer to pay the tenant if they will vacate in that time frame. But, if the market there is as tight as I think it is, there's no place for those tenants to go. 

    0Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    4y

    @Ryan Pearson $5k deposit as in going hard/ released to the seller upon acceptance of offer, or just normal refundable earnest money with contingencies? It will be much more meaningful, but less common if it’s the former. If it’s regular earnest money that wouldn’t really move the needle because you could still use one of your contingencies and get that back. Either way it might not be enough $ to entice the seller to remove the tenants prior to closing. They could have other reasons but they’re probably worried about the deal falling through and being stuck with no tenants, or the timeline of having to provide notice/ potentially having to evict and what that will do to the closing. Or they may just not want to. Sounds like they just want a quick close and as clean of a transaction as possible to me which doesn’t allow time for removing tenants. Maybe they could sell for a little more if they listed it vacant but maybe they’re more concerned with selling fast because they are on a timeline for a 1031, need the money for investing in something different, life circumstances, who knows. I would just do your due diligence, get those estoppels, price in removing the tenants into your costs, include a provision in the contract that they can’t sign a long term lease while under contract, and go from there. It’s a sellers market and if they have other buyers that don’t require the property be delivered vacant then there’s not much else you can do if you want the property.

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    4y

    @Ryan Pearson

    I’m my small area of Pa, it takes 41 days start to finish to evict someone, that’s with no glitches. So right there kicks your 30 day closing..

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    4y
    If this is in California, I would be pretty nervous. If the tenants stop paying rent, how long and costly will it be to get them out? How easy is it to give a 30-day and then force them out if they refuse to leave?

    Another red flag? All cash and 30 days to closing. Either the Seller know's it's a Seller's market and he's confident in what he's selling, or he's trying to hide something.

    You could ask for proof of payments during the inspection phase and back out if he fails/refuses to show verifiable documentation.
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  • Todor Ialamov
    Real Estate Agent · Burlington MA · Member since 2018 · 114 posts · 142 votes
    4y

    @Ryan Pearson

    May be they don’t want to promise something they can’t keep. If the tenant refuses to leave and they start an eviction, it would most likely take more than 30 days. You would have an option to get out of the contract and they might end up with no deal and an angry tenant.

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    4y
    Originally posted by @Ryan Pearson:

    I just went under contract on a row home property in Philadelphia. It's a 3 bedroom 1 bath SFH with current tenants paying on a month to month lease. Seller is requesting cash offers only and 30 days or sooner on closing. In the original offer we requested for the seller to provide the property vacant at closing. The listing agent got back to us saying "serving vacant would be a deal breaker". Owner has verbally said to our agent that the current tenants are up to date on rent. I'm assuming the seller is apprehensive that serving vacant could delay closing? Other than that I don't understand why the seller would not want to provide vacant at closing. I even requested permission and reached out to the current tenant to get more details but have not received a response. Does this give off any red flags to anyone? Does anyone have any advice on what we can do to protect ourselves in this situation? My biggest concern is that we get the property and the tenants refuse to leave after terminating their rental agreement. I appreciate any advice.


     Yes, there are red flags here. Although they are all coming from you.

    • As a seller I would not kick out my tenants for you. What if you don't close? Total rookie move asking for this. You want a vacant house, then make an offer on a vacant house.
    • Why are you contacting this seller's tenants right now? That's going to make a lot of sellers upset with you.
    1Reply
  • Andrew B.
    Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    4y

    If this property is in CA then you are insane for even asking for it to be delivered vacant. The seller wants to close in 30 days. You really expect him to try to kick out a CA tenant in less than 30 days? 

    1Reply
  • Chinmay J.
    Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
    4y
    Originally posted by @Ryan Pearson:

    Some of you guys really need to get better at comprehension. He already said it's in Philadelphia. As in Philadelphia, PA. Why are you guys saying, "If the property is in CA".. It's doesn't seem to be the case..

    You should be glad that in this market the seller is even talking to you, and has not moved on already with another buyer

    The current market reminds me of old Seinfeld episode of Soup Nazi.  One small thing that's even slightly upsets the seller and they are onto the next one.  

    If the deal makes sense, take what you can get or move on to the next deal, and hope for better. 

    1Reply
  • Alex KhanPro Member
    Specialist · Southeast Michigan · Member since 2015 · 300 posts · 244 votes
    4y
    Originally posted by @Ryan Pearson:

    I just went under contract on a row home property in Philadelphia. It's a 3 bedroom 1 bath SFH with current tenants paying on a month to month lease. Seller is requesting cash offers only and 30 days or sooner on closing. In the original offer we requested for the seller to provide the property vacant at closing. The listing agent got back to us saying "serving vacant would be a deal breaker". Owner has verbally said to our agent that the current tenants are up to date on rent. I'm assuming the seller is apprehensive that serving vacant could delay closing? Other than that I don't understand why the seller would not want to provide vacant at closing. I even requested permission and reached out to the current tenant to get more details but have not received a response. Does this give off any red flags to anyone? Does anyone have any advice on what we can do to protect ourselves in this situation? My biggest concern is that we get the property and the tenants refuse to leave after terminating their rental agreement. I appreciate any advice.

    Hold two to three Months rent from the owner ( Contract Holder) using an escrow service, conduct an inspection after closing to ensure the tenants and previous owner have delivered on their agreement as promised and then sign the release of funds. Piece of cake!

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