Detroit, Michigan (PRWEB) April 22, 2013
With home sales activity increasing throughout the country, sellers are feeling excited about better prospects. Some national mortgage programs are less restrictive than in recent years and buyers needing home financing feel relieved. Despite the optimism, sellers and buyers must still keep their wits about them to avoid making silly real estate mistakes that can have financial or legal consequences. Making your buyer your tenant, ("buyer/tenant") is but one avoidable mistake that sellers often make.
Understand that selling a home can be a lengthy and often frustrating process. Perhaps a seller is seeking a short sale with their bank, or a buyer's financing arrangements hit a snag. When things don't go as planned, eager sellers and anxious buyers may consider allowing the buyer to move in the home prior to a closing. Regardless of pressure from the buyer, their real estate agent, or your own good intentions, here are four reasons a seller should never let their buyer become their tenant:
1. The buyer's new legal status as "tenant". When a seller allows a buyer to move into the subject home before a closing has occurred, they now have created a landlord -tenant relationship. And like some tenants, they may not pay rent, or they don't leave when they should. So when a buyer, in anticipation of securing a mortgage is later denied, the buyer should leave the home voluntarily, right? If they refuse to leave, then the seller must legally evict them since their buyer now has the same rights as a tenant under the law. Unless there is a mutually beneficial relationship that remains after the buyer's financing falls through, there is no further reason to allow the buyer to stay in the home.
2. Buyer's remorse is quickly amplified. The excitement of buying the seller's home is short lived. The buyer / tenant now living in the home may begin to notice the little things that they may have overlooked when they first fell in love with the home, or they realize a deficit in their earlier buying decision. Perhaps the location isn't as good as they thought, they found a cheaper home, or worse, they met your neighbors. As "tenants", they are free to look elsewhere for a more "suitable" home.
3. The "test drive". Once the buyer moves into the home, unless specifically stated otherwise, the seller is obligated to make any repairs to the home while both parties are awaiting the closing. Suddenly items that would normally be a new buyer's "wants", become their "needs" and at the seller's cost. From having simple blinds replaced, to having a furnace or air conditioner replaced, a sharp buyer won't close on the home until their "needs" are met. Don't be a sucker and let a buyer "test drive" your home.
4. The "garage" scenario. Often there may be a small window of time between the buyers move from their former residence and the time for closing on the new home. When the buyer's real estate agent asks if the buyer can set their items in the garage before the closing for a few days, be careful. Resist the temptation. If the sale does not close, will the buyer remove their belongings from the garage? If so, when? Next week? Next month? Next year? If and when the buyer does remove their items, is the seller prepared to answer for the disappearance of a priceless heirloom that was allegedly in the buyer's belongings, now termed "antiques"? Should the seller have to underwrite the risk posed by storing the buyers items, now "treasures", in their garage? Avoid the needless headaches and pass on this request.
Considerations. Seek the advice of an objective legal professional. Yes, there are good real estate agents out there. They are essentially the sales person that ushers a buyer and seller through the home sale process, and good agents make the job look easy. It isn't. But despite these accolades, agents are still commissioned sales and marketing people. And what may be good for them and their client, may not be good for you. What happens when your deal doesn't close? If the buyer / tenant fails to leave voluntarily, the agent will not be paying for, nor performing the eviction. If the buyer / tenant destroys the inside of your home, you will be paying for repairs in order to get the home back on the market. If a buyer fails to remove their items from the garage, you will be hauling these items away, or walking through a mess every day. Not the agent.
No one says that the buyer/tenant relationship is completely untenable, Certainly the examples above are provided for the seller to stay alert and take precautionary measures. Sellers need to obtain maximum protection by consulting with outside real estate counsel so that they may protect their biggest investment, and themselves from becoming an unwitting landlord.
About the Author: Since 1990, David Soble has been a real estate and finance attorney in Ohio and Michigan. He advises national banks, lenders, loan servicers, consumers and business owners on residential and commercial real estate, finance and compliance issues. He has been involved in thousands of real estate transactions, being responsible for billions in real estate loan portfolios throughout his career. And while he may seem overly cynical, he has 23 years of real estate battle scars to support his comments.