Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
I am selling a 3 family property and one unit is soon to be vacant. The buyer wrote the following in the sales contract:
Seller to allow buyer to locate new tenants, show the unit and rent the unit as soon after current tenant vacates as is practical, even before closing takes place
Does anyone have any thoughts on whether this is a good idea or not? or have a better solution?
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Shawn Mohovich When is the property closing escrow? It would be more practical for you to rent the property out, allowing the new buyer approval if you'd like. If the escrow doesn't close, it will be you renting to the new tenants, not the buyer. I wouldn't allow the new buyer to start representing the property yet, it can turn into a mess.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Shawn Mohovich When is the property closing escrow? It would be more practical for you to rent the property out, allowing the new buyer approval if you'd like. If the escrow doesn't close, it will be you renting to the new tenants, not the buyer. I wouldn't allow the new buyer to start representing the property yet, it can turn into a mess.
I would only allow if new tenant meets your criteria and standards, the lease executed by you and then, as is required, the lease is transferred with the transfer of title.
Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
13y
That makes sense but why do I want more work if I am selling the property. Now I will have to review the tenants application, and what do I care what kind of tenant the new owner gets. And if I don't approve it could cause some sticking points before closing I would think.
Investor · Northeast, OH · Member since 2012 · 239 posts · 106 votes
13y
Shawn Mohovich
Two ways to think about it. The first is the way you're looking at it. The sale is imminent, so just make things as easy as possible and leave the unit vacant. Understandable.
The second is a more conservative approach. What if the sale doesn't go through and you have to go through several months of vacancy while you remarket and find another buyer?
It might be better to get a renter using your standards (because ultimately you'll have to live with the tenant if the deal falls through). You could offer to allow the buyer to review the applications and offer non-binding input.
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
13y
@Shawn Mohovich:
In all our offers where we expect to assume a tenanted property we include a clause that docks 3-months rent for each vacant unit from the price at close. The purpose of this clause is explicitly to counter the "why do I want to do more work if I am selling the property." attitude.
Now, in reality we know Vendors are occasionally disinclined to place new tenants (or expend the effort to place quality tenants) in a unit once the building is under contract, so we offer to do exactly what your buyer is doing ... assist the Vendor to fill the vacancy(ies) with credible new tenants {we also reserve the right to ensure the new tenants meet our standards}. After all it is in both our interests: if the deal closes, we have a tenant who "fits", if the deal falls apart, the Vendor does not have a vacancy.
Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
13y
@Roy N. I like what you are saying, I would rather give the buyer a few months rent than allow him to have keys and access to the building at this point. It just seems cleaner. In reality if I agree with his plan he would be getting 4-6 weeks head start on finding someone. It seems like to avoid all the hassle of working with him to try and find a tenant that we both like it would be easier to give him 2 months rent and wait till closing for him to have access.
Roy, have sellers given you access prior to closing? & how did that work out?
Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
13y
@Shawn Mohovich:
We've never had unfettered access to a building before close. We have recruited and screened tenants in conjunction with / on behalf of the Vendor. The viewings have always been conducted by the vendor or a mutually agreed agent.
Unless there is severe friction between you and the buyer, I really think the better path is to allow her/him to expend the bulk of the effort and costs to screen the tenants - with you reserving the right to ensure any tenant selected is one to whom you could rent. If you are using a realtor, you can use your agent to perform the showings (or his).
This would be cheaper for you and a happier experience for your buyer.
My influence for this approach came from past experience acquiring and selling businesses. I liken the collaboration to fill vacancies to a transition team used when preparing for transfer of control in a business sale.