Cash for keys...do I have the right?

Question

Hi everyone,

I am currently working on a wholesale deal that has two major barriers. The first barrier is that it is listed with an agent. This means all offers must go through the sellerâ€™s agent. This is not the biggest problem because I have direct contact with the seller; he actually called me about buying his house.

The bigger problem is that there is a tenant currently residing in the home. She will not respond to requests from the sellerâ€™s agent to show the house. She is also late on her payments for the second time. The first time they went to court and she paid a lump sum to stay.

The Realtor wants to file for eviction again and said that he would show it to me after she is out. The problem is that this could take months. Also, this would mean that the sellerâ€™s agent would have control of the deal, meaning it will be much easier to sell the property once the tenant is out. I believe this is their major stumbling block since no homeowner or investor wants to buy a house with a deadbeat tenant in place and this is enabling me to purchase the property at a steep discount. Not to mention they canâ€™t even show the property even if someone did want to buy it. If I wait the months after the eviction I am pretty sure they will move this property for a much higher price than the seller agreed to sell it to me for and I will have wasted a great deal of time for nothing.

As investors we make money by solving sellerâ€™s problems with creative solutions. The problem here is the tenant and if they solve it themselves then there is no motivation to sell. I want to be the solution to this problem so here is my question. Can I contact the tenant directly and ask her if I can see the property? I am planning on offering her $500 to vacate the property and given the neighborhood and the tenantâ€™s situation I am pretty sure she will take this. If the seller gives consent, which he has, can I do this?

Sorry for the long post...look forward to hearing from you.

Joe Salimao

Matt Kearney · Answer

Hi Joe,

This is a good idea.
As others have stated make sure you have an agreement in place with the owner before spending your time initiating the cash for keys. Also don't give any money to the tenant until they are out.

I am doing one of these right now on a bank owned home. The bank foreclosed and wants to quickly sell the property to me with the former owner still in their as a tenant, the bank doesn't want to deal with the eviction. I put the house under contract at a very nice discount, and immediately approached the tenant (former owner) with a $5,000 cash for keys offer. He took it and agreed to be out in 30 days.

Don Konipol · Answer

sounds like you found a solution.  You can even offer the tenant $50 to let you see the property now.  Then you can tie the property up with an offer.
An alternative is to tie the property up with an offer now subject to inspection. It is up to the seller to arrange an inspection day and time. Most likely the tenant will have to be evicted or made to honor the inspection clause in the lease (if their is one).  Once you tie the property up with an executed contract, the seller is legally bound to sell to you at the price negotiated, whether of not the tenant problem is solved.

Joe Salimao · Answer

Thank you all for your replies.

Have any of you been through a similiar situation? If you have would you have a letter you could share with me that I can send the tenant?

I do not have a phone number for her so the only way to contact her is through the mail. I am planning on putting a letter in the mail tomorrow. I will keep you guys posted.

Thanks again!

Joe Salimao

Bill Patterson · Answer

Joe, I like your approach to investing...." I want to be the solution to this problem"!  With this attitude to investing and taking care of the details, you will do very well!  Good luck with the tenant!  BTW, the lease should have a provision to allow the landlord to show the property to prospective buyers or tenants.  This will save you $$ to see it, but the offer of $$$ to get them out is a good idea.  The concept of buying out a tenant's leasehold interest has worked many times in residential and commercial sales.
Bill

Bryan Hancock · Answer

Tie the property up NOW with an inspection contingency and file a Memorandum of Agreement to cloud title so that you don't have to sue for specific performance if they go around you with a new contract post tenant removal.

BTW...I learned about the Memorandum of Agreement from Bigger Pockets!

I wouldn't put too much stock in what the property looks like right now so I wouldn't trade cash for a look-see.  The tenant could tear the whole place up after you invested good money to see it...especially if an eviction is involved.

My two cents...

Peter Giardini · Answer

And whatever action you take make sure everything is in writing by all concerned parties or you may find yourself getting the tenant out at your expense with no leverage in the deal.

Best of luck!

Cash for keys...do I have the right?

Cash for keys...do I have the right?

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