Monday, September 17, 2007

Purchasing Tenant Occupied Property

What do you look for in a home...three bedrooms, two baths, big kitchen, nice outdoor space, lots of light, and parking. Did I forget anything? Oh yes, of course, that the property is VACANT! Assuming you are looking for a home for yourself as opposed to investment property, you most likely want to move in right away. You are probably not looking to get into the landlord business which is what you have to do when purchasing a tenant occupied property. The whole process of transferring tenant occupied property is unpleasant for everyone involved. It is important for all parties to inform themselves of their rights and understand their role in the transaction.

Sellers

Your property is tenant occupied and you have decided to put it on the market. The first thing you must know is that this will affect the purchase price and the length of time on the market. Vacant properties sell quicker for a higher price. Having said that, you cannot evict tenants in order to sell; that is not one of the fourteen just causes for eviction in San Francisco. If you have a friendly relationship with your tenant, have a talk with them before you list your home. They may decide that they don't want to be around while the house is on the market as it is a huge inconvenience for them. They may decide on their own to start looking for a new home immediately. That, of course, would be your best case scenario. Always keep the communication lines open with your tenants; if they do decide to stay, you must let them know in advance of any and all showings. Keep them in the loop of how the sale is going and what the time line looks like. It will be unpleasant for them. Try to understand their situation and be as courteous as possible.

Buyers

Purchasing a home with tenants means you have become a landlord. Any and all leases and security deposits will be handed over to you in the sale. As I mentioned before, you may have gotten a break on the price of the home because it was tenant occupied, but remember that you may need that cash for tenant relocation fees and attorney's fees. Assuming you purchased this property to be your primary residence, you will have to evict the tenants. In this case you would use the Owner Move In (OMI) eviction which is one of the just causes to evict in San Francisco. You must give 60 days notice and pay relocation fees. Click the link to see a full list of restrictions and qualifications. Before you purchase, be sure to look into the tenant situation. Are they cooperative? Are they paying market rent? If so, it will be easier for them to find a replacement property. Lastly, if you do have to evict the tenants, be sure to use a landlord/tenant attorney and follow the procedure exactly.

Tenants

Let me apologize to you if you are a tenant whose building is being sold. This will not be a fun process for you. I met a woman in my open house this past weekend whose building had just been sold. Luckily for her, she was not evicted. The new owner bought the property as an investment, but she said that the year leading up to the sale was a nightmare. There were constant threats of eviction. When the property finally hit the market she had to deal with open houses. Make sure you know your rights. In San Francisco you have many.

The key for all parties involved is communication. It also helps to be sensitive to the other person's situation, on both sides. Renters are being uprooted and most likely will not be able to find a comparable home as the rental market has gone up lately. On the flip side, buyers have scraped and saved to purchase property in this expensive city and just want to live in their new home. This scenario is not ideal for anyone but is a reality for many. Some tenants, like the woman I met this weekend, may be fortunate enough to use this situation as a jump start to buy their own home. It's time to start paying your own mortgage! Give me a call!

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