As short sale agents, we have to endure the craziest scenarios. If it's not the most asinine requests from some banks/servicers, then surely it's the unusual repair requests from buyers (yeah right....my Seller's selling his home via short sale, hasn't paid squat towards a mortgage in over three months...HOWEVER, he/she certainly has $10,000 to pay for new carpet and paint). My all time favorite has always involved selling a tenant occupied home.
It always starts out the same.....Seller contacts me about selling a tenant occupied home and my first question is ALWAYS whether or not there's a current lease. In my latest escapade, the tenant was on a month to month lease. I advised my client early in the process that he may want to go ahead and serve notice to the tenant so that we wouldn't run into any problems with the tenant blocking showings (yeah....had that happen, too. Tenant showed up at the door with a gun and threatened to shoot the potential buyers if they stepped across the threshold). He assured me that these were really good people and that he didn't anticipate any problems at all. Well....lo and behold, we instantly receive an offer on the property and have full short sale approval with both lienholders within 30 days! The cash closing is scheduled for twenty days after receipt of the approval letter. I contacted the Property Manager who assured me that he gave tenant proper notice and that tenant is scheduled to move within an appropriate time frame. I was on cloud nine......until I found out that the tenant still hadn't moved and we were closing in four days!
When you are selling your tenant occupied property, you must be extra diligent or your entire sale could fall through. A few things to remember
1. You must give your tenant ample notice of showings, and if possible it is best to do it in writing. It is stated that the landlord must give a reasonable amount of time. Usually 24 hours is considered reasonable. (You also may want to check whether or not they have a tendency to show up at the front door with a weapon).
2. Georgia law requires that the landlord give 60 days notice to the tenant to vacate the property. Even if the lease states differently, Georgia Law prevails. This must be done in writing, preferably by certified mail. (Calling the tenant and verbally telling them that you're selling the property just won't cut it. You'll DEFINITELY need a paper chase).
3. If the transfer of possession takes place with the tenant remaining in the property, all terms of the lease must remain, but the new owner has the right to terminate the lease or change the terms with 60 days notice. (Very appealing scenario for an investor Purchaser....not so much with an owner occupant).
4. Once you notify the tenants of a possible sale and they do not pay rent, start the eviction process immediately. It can get tangled up if the new owner takes possession of a property that has rent in arrears. (Get them out, get them out, get them out....and just in case you didn't hear me....GET THEM OUT)!
5. If you have a property management company, make sure that they are diligent in notifying the tenant(s) and ask for copies of correspondence. (I give each and every reader of this post full permission to bug the hell out of the Property Management Company to make sure that they're doing all that they're supposed to do. Remember, they're about to lose a commission once the home sells).
6. Make sure all deposits are transferred within 30 days of the sale of the property if the tenant remains. (Be sure to provide the Seller written notice of their responsibility with the Security Deposits....unless you want to pay it).
As always, a tenant occupied property can be a very attractive purchase to an investor and the sale can be a smooth transaction. However, leaving things to "chance" can wreak havoc on your entire existence.....UGH!!!