Many of the things that go wrong in Real Estate are caused by groundless rumors. I saw this happen at one closing, and made the decision to discuss this matter up front with all my sellers with investment properties. It is a simple matter of controlling the closing date.
One of the things that has always worked for me is my honesty with everyone involved in a transaction. This includes tenants. I tell them the buyer we are targeting and why. Most often we are expecting an investor to buy the property and many investors are looking for properties with reliable tenants. In other words, if you are a good tenant, the new owner is going to establish a working relationship with you to protect his interests as well as yours. A very simple concept.
On one closing I found out how bad rumors and relatives sitting at home watching dramatized courtroom series can really mess up family, friends, neighborhoods and the world if given the chance. Here is the rumor:
A well intending relative who thinks watching hours or the judge know it all show takes a pinch of what they see on TV, add in 4 cups of imagination and hold the common sense, have to watch the diet. They come up with the strangest things like, don't pay the rent when the property is being sold. Your landlord is making a ton of money, doesn't need anymore, and your new landlord will never hear about it. WRONG!!!!!
Not to get into specifics, but rent checks and proration's are handled buy the title company doing the closing. In this particular case a delay caused by the buyer moved the closing from the end of the month to the 3rd. Upon hearing news of the sale, the tenants decided not to pay rent. The title company prepares the closing statement as if rent is collected. Seller is out 27 days rent from both tenants because all remaining rents are transferred to the buyer at closing. What to do?
In this case buyer and seller got on the phone. Both are professionals and worked out a solution. Buyer took the credit at closing and gave Seller until the 15th to collect the rent. Buyer went to introduce himself to the tenants, making it clear an eviction notice will be served if rent is not paid by the 15th. It took a bit of additional paperwork, but what else are you going to do? I guess this shows how a little bit of knowledge can be dangerous.
How to avoid the problem. Don't let the tenants know about a closing until the rent has been paid and always close just a few days before the end of the month. Its nice to keep tenants informed, but this is really a decision for the buyers and sellers. Tenants will figure out a sale is in the process when inspectors and appraisers begin showing up. Agents still have to work with the tenants to make these and maybe future showing appointments. Trust is a delicate thing and essential in the Real Estate business. Plan accordingly.
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