Should I be paranoid about this home buyer?

In My Humble Opinion
21

I don’t have any advice. But the last time we moved (and sold our house), we did something similar. There was some issue with the timing on the closing on our buyer’s house and the loan processing. But, in any event, they moved in a week early and paid some arbitrarily determined rent for the week. Our realtor suggested that this was fairly common. And the Realtors’ Association had a form contract that we used.

I’m sure there were plenty of potential pitfalls, but we didn’t have any issues at all.

22

**Annie-Xmas **nailed it in post #2. I am also an agent in my state.

Read your sale contract. Did the Buyer promise anything that they did not deliver on? Are they responsible for any missed deadlines? Either would be a breach of contract, and give you some leverage. Example: if they promised to have financing lined up by X date, and that date has passed without a commitment letter, this would be a breach of contract.

If the Buyer(s) are aware that the sale is in jeopardy due to their actions, and theoretically, a suit may follow, they may alter their demands. For example, they may propose that they temporarily rent somewhere else, at their expense, and store their property somewhere else as well, letting you off the hook.

Or, if you have them sign a short-term lease, pay in advance, and possibly increase the sale price, it might make it all worthwhile for all parties. Since the Buyer(s) are the ones requesting the favor, they should be the party to pay for any legal work needed to write the lease.

Caution: the lender may treat the new lease as a change in the Buyer(s) financial position, requiring a new credit report and probably a downgrade. This could backfire.

OTOH, you have to consider what might happen to the transaction should they decide to call your bluff. Is it worth it to you? Do you have another buyer lined up or can you wait for one?

One caution, and this is where the advice of an attorney is valuable. In my state, we use the wording “time is of essence” that can refer to specified items in a contract or the entire contract. This legal phrase means that a missed deadline, even a slip of a minute, is considered a breach, and there is no grace period unless specified in writing. Without that clause, the definition of a breach can be slippery, and harder to enforce. I do not know if this clause is universal, so check your contract or ask an attorney.

23

This was my first thought.

On the other hand, we’ve had situations where a month or 2 rental was involved in a sale, with us being the renters and the sellers, and it all worked out fine. The agents for both sides ensured that everything was in writing and everyone was in agreement. On some level, it comes down to trust. On the common sense level, it comes down to lawyers. Good luck!

24

Glad I decided to read the thread. This.

It sucks to have to sell by remote control, and I get the desire to be hopeful and to want to accommodate so the sale can go through. But I guarantee it will suck even more to evict someone by remote control, and then hope they don’t come back as squatters because you’re not looking. This is nightmare fuel.

If they haven’t got their shit together enough to close a home on time, or to make their own plans when something goes wrong, you can’t trust them to do right by you.

25

I will say that I knew a real estate agent and these last minute screw-ups from mortgage companies, banks, or title companies were almost routine. People that had 2 months to get paperwork ready for a closing and were paid very well for it would wait until the very last day to do it and then something would often go wrong.

26

We rented our house from the seller for two months while our paperwork was settled (lots of delays). We had a full rental agreement and everything. It worked out for both of us.

27

I am a realtor. This is way too paranoid. Banks (and Buyers!) screw up all the time, and deals get pushed back all the time.

I am not your agent, and I am not licensed in your state. But, if I had a client in this situation (and I have, multiple times) I would advise:

1- Not renting to them. Too much liability for possible eviction and property damage. Sure, contracts can be enforced, but over how long? If they tear giant holes in the wall and steal the bathroom fixtures, you can sue them, but it takes a long time and you still have to collect the money. And the asset has lost value.

2 - MAYBE the garage storage idea. Maybe. Some of the same issues as above though.

And my first move would be to get on the phone to the bank and push, push, push to get it done. Lenders can move 100% faster than they actually do - make them find the speed to get it done. This is your agent’s job - you do have an agent, right?

28

If you’re thinking of dropping the price 5K to get a quick sale why not offer them 1K to move in after the close.

It might work for them and you both.

Just a suggestion!

29

Charge 5 k extra in rent. Lower sales price by 5 k. Net the same to buyer, so shouldn’t be an issue. If they don’t go through with purchase, you have 5 k for the hassle.

30

I’m sorry about your father’s passing, and I’m sorry about the mess with the house. My mother died almost exactly a year ago, and my brother just had the final meeting with the IRS a couple of weeks ago that should be the very last thing that finally closes her estate, and she left everything in very good order.

So I’m sorry for your loss, and also sorry for all the work you have.

Anyway, when my father died (and this was now almost 21 years ago, and in another state from yours, so I can’t speak to your laws), my mother decided to sell her house. She had one buyer (buyers, actually, a couple) lined up, but had not started paperwork with them, and they had balked for some reason, so she decided to go on to another buyer. Well, the first buyers got mad and threatened to sue if she didn’t sell to them. They apparently were under the impression that the second buyer had offered her more money (not true), and they were being ditched for someone who was “bribing” her.

The fact was that she just wanted to get the house sold as quickly as possible, and she had not started proceedings with the first buyers; she’d just told them their offer was acceptable, but then they wanted to put conditions on it, and essentially it altered what they were offering. My mother consulted a lawyer, and was told that she was in a solid legal footing (she had a realtor at any rate, who wouldn’t have let her move on if it hadn’t been allowed).

But my mother still had to pay the lawyer’s fee, and the sale was delayed; the second buyer could have given up. He didn’t. The second buyer got the house, and the first buyers went away, without suing.

Again, I don’t know what the laws are in your state, but it’s not possible for you to get sued for breach of contract if you don’t sell to these people, is it? It might be to your advantage not just from the standpoint of getting rid of the house, but also from the one of not getting any legal hassles, to make the sale happen for them.

Since a realtor (Sateryn76) says don’t rent to them, then don’t, but the people who have pointed out that if you would take $5k less for the house, you don’t really lose anything if you lower the price a little to make it easier for your buyers to stay some place temporarily.

There are storage places that pick up and deliver. I don’t know where they currently live-- if they are local, it’s easier, but even if they aren’t, it’s possible to use one of these places. They send a “pod” to your place to pick up your stuff (more than one, if you need), and take it to a storage facility, where they park it. Then when you want it delivered, they bring the pod out to you. It’s basically like renting a moving truck, but you don’t unload it right away. The trailer gets detached and parked someplace (a secure place), and then brought to you when you want it. My mother did this with her stuff, because she wasn’t sure where exactly she was going to end up after she sold the house. She wanted an apartment near her mother, but she also thought about moving a couple of other places. She ended up keeping her stuff in storage for about two months. It worked out fine.

I don’t know what the logistics are of lowering the price at this point in the game, but it doesn’t hurt to ask your realtor.

31

If they could put down a $X deposit, would that solve the problem? How big would $X need to be? Presumably they have some big wad of cash on hand for their down payment, no?

32

We had the opposite happen. When we bought our first house near Charleston, South Carolina, the seller was thinking he was going to get into OCS for the Navy.

He didn’t. He asked us the DAY BEFORE the closing if they could stay for a few weeks after the papers were signed. Ivylad and I had already been packing, we had two small children, so sorry, we couldn’t accommodate.

He apparently blew a gasket, our realtor told us, and threatened to cancel the sale. Our realtor and his had to explain the realities of the situation to him. It made for a very tense closing (this was in the days when both parties would meet at the same time to sign all the papers.) But, we got our house and I have no idea where he ended up.

33

Shit happens, so it’s not necessarily nefarious. And I can understand accommodating to get the sale done.

But, in addition to making sure that you are clear about the ability to evict if they don’t actually close (e.g. make sure they expressly waive notices, and make sure you are clear that there is no option to extend this lease, even by just going month to month) you want to make it very, very clear that they accept the condition of the property as of the time they move in. You don’t want them living there as a tenant and finding all sorts of maintenance issues that, as a buyer, they want to haggle over.

34

Another word of advice: Make sure everybody involved in the sale knows about the rental arrangement: the real estate agents and their brokers, the attorneys, the bank, the mortgage company and anyone else who has any stake in the deal. Keep copies of all paperwork and make all the parties involved get copies of it.

Lawsuits and fines have been known to happen from such arrangements.

Keep all copies of any paperwork and if the deal gets messed up, report everything to your state real estate commission. They can levy fines and/or suspend or even cancel licenses over any illegal and/or fraudulent activity.

An agent I did business with had a closing on a vacant property moved up a week. She allowed the buyers, who had the moving van all packed up and ready to go, to move their stuff into the house. She went into the house with them, supervised the items being moved in, and made sure they never had the key and did not physically move in until after the closing a week later.

The sellers reported her to the real estate commission, and it cost both her personally and our office a $500 fine.

35

I’m wondering about something–maybe the real-estate pros who’ve posted above can answer:

Selling to someone is one thing; renting is something else.

So would it be appropriate for the seller to run a background check on his potential tenants?

36

Ask your realtor.

37

Just to echo: if you do end up temporarily renting to the buyers, ensure that their signing a rental agreement doesn’t disqualify the loan. A lot of folks barely squeak into mortgage approval, the bank could back out if the client has a sudden, new housing expense.

I’ve had three mortgages over the last 25 years. Not one of them went 100% smoothly. Several years ago we fired a mortgage bank when they got hung up on some $200 discrepancy very, very late in the game – we were selling our Upper East Side (NYC) apartment and buying a NJ home that cost 1/4 the profit we’d make from the apartment. Idiots! We had a new bank within four hours and closed in a week on both places.

38

We had the opposite proposal when we bought our current house. The owner was moving across town and wanted to close on our house so he could have the money to close on the other house. So he wanted to rent our house between closings.

Our agent was obligated to pass on this request, but didn’t think much of it. Pointed out that this is why bridge loans exist. We passed. The guy was unhappy and tried to stir up stuff. Our agent just said “Some people just have mental problems.” His agent ended up on our side in the disputes that followed.

I want to have a “don’t buy from people with problems” requirement the next time, but not sure how to do that in practice.

39

To emphasize: Unless your real estate agent is the broker of record for their office, make sure the BOR knows about everything that is going on with the sale. The agent does not have the right to renegotiate anything whatsoever. The BOR has to approve any changes, and is going to have their ass kicked by the commission if anything that goes wrong is reported to them.

40

I’m still wary of the lease idea but I think it’s very good advice to make it clarify that they accept the condition of the property.