Talk about trying to pull a fast one!

A client of mine was recently approached by the listing agent for the property she is currently renting, and he asked her to be part of something rather….inappropriate.

No, no, it’s not what you think.  But either way, I advised her to steer clear…

Looking to purchase a property when you’re currently leasing is not always an easy predicament.

If you’re on a one-year lease, you can break the lease with sixty days notice….in some cases.  I’ve had clients do this before, and others have had their attempts thwarted by Landlords who are more familiar with the law.

If you’re on a month-to-month, you can simply give sixty days notice, and you’re all set.

But everybody has the exact same thought process when trying to balance purchasing a home while maintaining their current residence, “I just don’t want to end up on the street!”

It’s a delicate balance, and it can at times feel overwhelming.  But at the of the day, a month-to-month tenant can take his or her sweet time finding a suitable home and then line up the closing date of the new property with the required sixty days notice of the rental.

But here’s a spin on things: what if the property that the tenant is leasing happens to be for sale?  What if the tenant could be given notice to vacate just as he or she is looking for a property to buy?

I’m currently going through these motions with my client, Sara.

Sara has been leasing a property in The Distillery District for two years.  She never got the serious itch to buy her own property until this year, and around the same time, her Landlord informed her that he was going to sell the very condo she was leasing.

In the past couple weeks, Sara and I have been searching high and far for condos in her price range that also have that unique, “je-ne-sais-quois” feel to them, but we’ve come up empty handed.

In the meantime, an offer has been made on the condo she is currently leasing.

This is where things get tricky, and where it pays to have the attitude, “Am I about to get royally screwed?”

The buyer and seller are unable to come to an agreement regarding Sara’s tenancy.

The buyer would like Sara to continue renting the property, as the $1300/month income can help him pay off the new mortgage.

But the buyer would like some sort of guarantee that Sara will stay.  Remember, Sara is on a month-to-month lease which can be terminated with sixty days notice at any time.

So the listing agent for the property approached Sara and asked her if she would sign a “new lease” that would be included in the Agreement of Purchase & Sale between the buyer and seller.

This is when I absolutely freaked.

How inappropriate!

A transaction between buyer & seller need not include the current tenant!

Why should Sara be stuck in the middle?

Think of the legal ramifications of Sara putting pen to paper in somebody else’s deal!  Any time you sign your name on a dotted line, you are liable for something.  Why should she take on any unnecessary liability or responsibility?

I have two theories on why this was asked of Sara:
1. The buyer & seller are possibly $10,000 apart in the negotiations, and the $1300/month income stream on a new year-long lease would help bridge that gap.
2. The buyer cannot get mortgage financing for the property, and is trying to secure a new lease with Sara to show the mortgage lenders that he has additional income to pay off the mortgage.

I told Sara that she should NOT, under any circumstances, be involved in this transaction between buyer and seller.

What is there to gain?

Regardless of whether or not Sara would like to stay for an additional six or twelve months, she needn’t be part of a legal transaction between two parties that really doesn’t concern her.

The buyer and seller are essentially using Sara to bridge the gap and make the deal work.

But Sara would be signing her name on documents for a property that she will not buy, nor sell.

She is a third party to the transaction, and she should stay independent of this deal.

The clause in the agreement called for “an additional tenancy period of six months after the buyer takes possession of the property.”

So what if the buyer and seller agreed, unilaterally, to extend the closing date an additional three months?  This would put Sara on the hook to stay the six months that she contractually agreed to, but not until those “additional” three months are up!

Sara would be putting herself at the mercy of the buyer and seller, and the changes they could invoke to the current Agreement of Purchase & Sale.

I was surprised that the listing agent for this property even asked Sara to be a part of this, but then again, what did he have to lose?  Nothing, really, and he had everything to gain, ie. making a deal work that might fall through if the current tenant wasn’t signed up for another 6-12 months.

He was trying to pull a fast one, and it didn’t work.  Sara was far too smart, and saw the con-job coming a mile away.

She suggested that instead of being a part of the transaction, she could meet with the buyer, face-to-face, and simply come to a gentleman’s agreement about staying for a few months after the deal closes, on her terms.

And why should it be any other way?  If the buyer really wants; really needs a tenant to stay, then he should accommodate Sara and her terms.

All this deal really needed was some good old fashioned honesty, and face-time.  I expect Sara will meet with the buyer, he will see that she is a sincere person who would make an ideal tenant, and they can find an arrangement that suits them both.

I shake my head as I think of that sneaky listing agent and his crude tactics.

But I can’t help but wonder: If I was working for my seller-clients, would I have done the same thing?