How to Sell/Buy a Tenant Occupied Property
When a good broker is representing a buyer, he will be sure to ask important questions of the seller or the seller’s broker. It is extremely important for the buyer to know the current occupancy status of the home. Specifically, the buyer needs to know whether the seller is living there, if there is a tenant in possession, whether there are any future leases on the property which may serve to restrict the buyers plans for the dwelling. Also, it is important to determine if the lease requires the tenant to vacate due to a sale, or rather would the buyer be purchasing the home subject to the terms of the lease.
Alternately, an honorable broker representing the seller of a tenant occupied property (who does not need to vacate due to a sale) should report this information to the MLS, so interested buyers will be aware the home’s status. Although the sales contract states the current status of the property, it is better to get the information early, so that everyone’s time is not wasted.
If the property is being leased, the buyer should be aware of how much time is left on the lease, and whether the landlord plans to extend the lease before the closing date. It is a serious mistake to enter into a contract without a clear understanding of the situation.
If the buyer intends to purchase the property as an investment, he may want the tenant to remain in place. In this case it is important to determine the quality of the tenant: Is he behind on his rent? Have there been complaints by any of the neighbors? Is he amenable and reasonable if you want to show the dwelling down the road to a new tenant or a buyer?
As stated earlier, it is imperative for the contract to specify the status of occupancy and any and all details regarding a leased property. Paragraph 6 of the FR/Bar contract informs about the occupancy of the property at closing. It states that the seller shall deliver the occupancy and possession of the property free of tenants, occupants, and future tenancies unless paragraph 6(b) is checked. This paragraph should only be checked if the property is occupied or if a future tenancy is expected.
This important paragraph also states that the seller will disclose the existence of any third party and the terms of the lease in writing along with a copy of the lease. If the buyer does not approve of the terms of a given lease, the buyer may terminate the contract within 5 days of receiving the information.