Prospective investment buyers are turned off by uncooperative tenants

By
Real Estate Agent with Alain Pinel BRE 01367196

Unmotivated tenants can be difficult  

When I was looking to buy my duplex, I encountered tenants who were visibly upset that they had to show their place to prospective buyers, and who were obviously unmotivated to move. They looked sullen and impatient. And when I looked at the lower unit, I could hear them stomping upstairs where they lived.

When I talked with them, they tried two tactics: first they tried to scare me by saying someone committed suicide in the attic; and then they tried to appeal to me by saying they really love their home and would like to stay.

I asked them if they would move downstairs (because I want to live upstairs). And their response : "What? And downgrade our lifestyle?" Ahhh.....so it wouldn't be okay for them to downgrade, but they would expect me as the owner to downgrade?

As a result, I wanted them out of there by the time I close escrow!

 

Deliver the property vacant by close of escrow

Today, my clients and I went to a group showing of a duplex. There were at least six groups all waiting to view the property. In spite of the listing agent making the appointment with the owner who informed the tenants, both tenants refused to let us in and became argumentative with the listing agent, accusing her of having a bad attitude. 

I couldn't understand why tenants who would want to stay as they indicated they do, wouldn't be on their best behavior and try to impress the prospective buyers, in the hopes that the next landlord would want to keep them.

The argumentative and uncooperative tenants --- and especially those who make their place look even more trashy in an effort to discourage buyers --- are making a convincing argument NOT to keep them.

To a person, every single prospective buyer said that if they are successful in buying this duplex, their first condition would be to have the property delivered vacant by close of escrow,  and after the requisite 30 or 60 days notice depending on how long the tenants have lived there.

 

"Are there any protected tenants?"

This is one of the first questions we ask, especially in rent-controlled cities like Oakland, Berkeley and San Francisco.

The article about the many faces of protected tenant status provides several examples of protected tenant status that can make it extremely difficult if not impossible to get tenants to leave.  The elderly, sick and disabled are in that group. 

Investors, including those who plan to live in the property, are less willing to deal with protectted tenants in place. 

I know of a case where on the day the buyer closed escrow and tenants were supposed to vacate, the tenants filed suit claiming protected tenant status because someone in the household became ill. Months of negotiation, suit/countersuit, and tenants demand of $80,000 to leave, the buyers settled at $40,000 cash for keys.  

 

Lesson?

Don't close escrow unless conditions are met, including delivering property vacant! Best that the new owner find their own tenants than live with the ones who were problematic from the beginning.

 

RELATED POSTS

Tenants from hell caused property to be foreclosed

Three sellers. Three tenants from hell

 

 

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Rainmaker
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Sandy Padula and Norm Padula, JD, GRI
Realty National - Carlsbad, CA
Presence, Persistence & Perseverance

Pacita Dimacali We have bought and sold residential investment properties and can completely understand your experience. Horror story on the $40k cash for keys story. 

Jul 15, 2015 09:00 PM #1
Rainmaker
709,042
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Sandy and Norm ---- Whenever I encounter landlords who want to sell their income properties, the first thing we do is try to get the tenants to cooperate by offering certain things that may appeal to them: discount off their monthly rent, gift cards, etc. Or we offer free clean up after they vacate (we have to do this anyway to make the unit presentable).  An uncooperative tenant spells disaster when selling. 

 

Jul 16, 2015 06:07 AM #2
Ambassador
2,981,871
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

That would be the worst...to have bought a home and find there are still tenants in it.  What a nightmare.

Jul 16, 2015 08:39 AM #3
Rainmaker
709,042
Pacita Dimacali
Alain Pinel - Oakland, CA
Alameda/Contra Costa Counties CA

Chris Ann Cleland --- We have a crazy market here...rents and home prices have gone up significantly. Tenants who need to vacate are desperate to hang on to their rentals because they are afraid they can't find anything suitable.

 

And if tenants don't move before buyers close escrow, it will be buyer's nightmare to get them out.

 

Jul 16, 2015 08:50 AM #4
Rainmaker
2,829,507
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Totally agree with your post and comments once you get rid of the tenants you can update the place and get higher priced tenants of the new owner's choosing into the place, Endre

Aug 26, 2015 12:50 PM #5
Rainmaker
195,174
Antonio & Alexia Cardenas
Alameda County - San Leandro, CA. - San Leandro, CA
"The Realtors In Motion"

On one of my income properties that I sold, I offered the tenants $80 cash each time I showed the units. $20 extra if the unit was nice and clean. Yes, I spend about $600 for the 3 units but the results were great! I now pass along this tip to all my investor clients. Money does talk!

Antonio

Apr 28, 2016 02:26 AM #6
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Pacita Dimacali

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