New tenants moving in whilst sale in progress

[princess]

Hi,

It never rains but it pours. Having had a house on the market for months, and empty for weeks, we decided to tenant it whilst we wait to see if a buyer turns up. (have had 3 lowball offers in 5 months so not exactly waiting by the phone)

Finally found a suitable tenant who has paid a bond and wants to move in on Friday - all good.

But NOW just today we have a buyer keen to make an offer.

Key points:
1. Tenant knows house is on the market and tenancy is std open term.
2. Buyer also knows we are looking to put tenants in, but not that the paperwork has actually gone through (only happened today)

What would you guys do in this situation?

I'm tempted to wait til we actually GET an offer - at which stage we simply write on the S&P that the settlment date needs to be 6 weeks from date of agreement, OR earlier if tenant vacates sooner.

Keen to hear opinions of more experienced seasoned property people!

[SuperDad]

Having offered the tenancy agreement and accepted the bond, you are legally required to place the tenant in the property.

I had exactly the same situation 2 weeks ago. I have placed the tenant in the property, and apparently the offer is forthcoming this Sunday.

It may never eventuate or, if it does, is likely to be too low or full of rubbish contitions anyway. (This applies to both our situations.)

So place your bird-in-the-hand in the property, as you are legally required to do.

Paul.

[Tan]

I'm tempted to wait til we actually GET an offer

I agree. Wait until you have an offer. Otherwise you could upset a good tenant for no reason, and the buyer may make a snap decision to go when the house would really suit them.

At the moment buyers have all the power and take their time looking, thinking and twiddling their thumbs before offering. It could be a month before they offer, or they might never, despite the noises they are making at the moment.

The most likely event is that they will ask to go through again, and that's when to tell them. You have been totally open, and at the end of the day it will make very little difference to them. May even suit them if they can't move in immediately themselves.

[Dean@Massiveaction]

Assuming Paul is correct Princess, (and I believe he is), you don't have a choice :-)

[princess]

Thanks guys!

Yes tenant moves in today, and offer came in yesterday. It seems realistic (above our bottom line) but we are still negotiating :-)

At this stage they don't know the tenant is actually moving in - I'll let them know that when we start talking details like settlement date. We beleive its OK to say "6 weeks from date of agrement, unless earlier vacancy can be agreed with tenant" or words to that effect.

Will give tenant notice only when we have all the details sorted out with the contract. I feel a bit sad for her - but business is business right? Anyone got a 2-3 beddy vacant in Auckland? :-)

[SuperDad]

Looks like a good result is coming your way.

Business is business.

The tenant signed the lease knowing the house is on the market.

While is is unfortunate for the tenant, the fact that you have asked whether anyone has a spare 3 beddie indicates that you genuinely regret the situation the tenant has been placed in.

Paul.

[Tan]

We beleive its OK to say "6 weeks from date of agrement, unless earlier vacancy can be agreed with tenant" or words to that effect.

Yes, you can use that type of date.

Add a couple of days or a week for good luck. Having them move out on the last day could be a pain. Or if they don't leave til a day later you will be up for penalty interest.

[Niall]

If the s&p had "vacant possession" you need to move the tenant asap or start paying penalty interest. Yikes!

If the s&p has "subject to existing tenancies" its not your problem.

All the best,

Niall

[Bluekiwi]

I may have to sell a property, due to a wide range of reasons, but wouldnt be till latter in the year, tenants moved in about a month ago.

If I actually decide to sell, do I have to tell them, or can I just put out a few feelers through some agents, and time viewings with inspections.

Or if I cant do that, or I feel its more decent to tell the, do I have to offer them a rent reduction...

I wouldnt go mad like some people and have open homes every weekend and send people thru daily.

But its highly likely an investor would buy it anyway.

[Niall]

BlueKiwi,

If you are putting the property on the market the tenant needs to know. There is no necessity to offer reduced rent. However you can offer some carrots to ensure the property is in its best condition for each open home.

Have 2-3 set viewing times during the week minimum. Be prompt to any maintenance issues in the mean time so your tenant will be easier to talk to come sale time.

I have been through properites with the tenant present and the atmosphere has been toxic. Almost violent. The sitting tenants have a great influence on what future buyers make of your house.

All the best,

Niall

[Tan]

do I have to offer them a rent reduction...

I had just put the rent up on a property when I decied to sell it just after the 60 days rent notice. They paid the new rent and were no different during the time the property was on the market.

I have now taken it off as there was very low interest and it wasn't worth me selling for less.

I have previously left rents the same and had no problems.

I like the idea of set viewing times if you think a lot of people will be looking, and probably would avoid open homes in the future. Not sure they work well enough to upset the tenant in this market.

It really pays to have an agent that deals well with tenants.

[WGN ex-property manager]

Agreed.

The RTA requires you to inform the tenant that the property is for sale. I find offering the tenant a sweetener can make the world of difference to the quality of the presentation of a property. "Sorry I'm having to sell the house, but if you help me by keeping the place really tidy for open homes, I'll pay you $1000 if I sell the house for the price I need".

It's cheaper that staging an empty house most of the time :-)