I Need some Home Ownership/Real Estate Advice
 

Hey friends. My fiancé and I are about to buy our first home and I need some advice. We're currently under contract, but facing a few problems.

Quick Summary:
-The house we're purchasing is a single family, however the current owner has a tenant living in part of the house (own entrance, kitchen etc...).

-We intend to remove the 2nd kitchen & tenant entrance when we move in and bring it back to it's original configuration. Just minor work really.

-It doesn't have a legal rental permit, so basically the space is an illegal rental.

-The bank won't approve our loan if it's a 2-family residence. They'll remove the stove for the appraisal.

-Our mortgage rate lock is good until 4/28/14, so we were hoping to close by then.

-We find out after the offer, but before contract that the tenant supposedly signed a rental agreement until October 1, 2014. Our realtor told us he would agree move out by May 1st, May 15th the latest however, so we signed thinking they could close around May 1st.

-Contract states we can close "on or around May 1st"

-We expect the home to be vacant when we move in.

-Found out today that the tenant can't move out until the end of May.


The problem basically comes down to this. We don't want a tenant there when we move in. At first, our realtor told us the tenant could leave any time....that there was no rental agreement since it wasn't a legal rental. So we said okay and made our offer. We agreed on a price, locked in our rate and I set out to have a home inspection done. Then our realtor tells us the tenant can't move out until May 1st...May 15th the latest. We said okay, sign the contract which states we will close "on or around May 1st." Maybe we're naïve, but now we're finding out that "on or around May 1st" means it could be as late as June 1st?! Now they tell us that the tenant can't move out until the end of May. WTF! (I f*cking hate our realtor right about now! She's lied or misinformed us several times now, but we have no choice but to stay with her....her husband is the owner's agent). Which means we either keep the tenant (living in our illegal apartment) or we eat the cost to extend our mortgage rate lock and possibly jeopardize our loan. If for some reason the whole thing falls through, it also makes our loan officer look bad. Something we don't want since he's helped our family in the past and have a good relationship with. We took it on good faith that what our realtor was saying was the whole truth, big mistake. Now she's trying to put it all on us.

I guess my question is, what would you guys do? We really love this house and the appraisal already has us $20k ahead in equity. We already put down $10k for the down payment along with inspection fees, attorney fees etc....

If we purchase the property, do we have to honor the rental agreement? Is the rental agreement binding? ...even though it's a an illegal rental space?

Should we just close, let the tenant stay and collect rent? The reason he can't leave is because he's a professor at a local university and can't move until classes end. We want the house to ourselves though and don't need the rent or the liability of an illegal rental.

Any advice would be greatly appreciated. Thanks in advance.

Potentially complicated problem. I hope you're seeking advice from sources other than a sports car forum. Like maybe a lawyer....

Personally, I'd let the Professor stick around. Path of least resistance. Especially since you don't seem to have a commitment in writing.

Other than consulting a lawyer (which is what I recommend), it seems you have two options.

First would be close on the house with the tenant and let them stay. Seems easy enough, but I can definitely understand not wanting them there. Bonus rent income for a month is always nice.

Second would be to screw over the tenant. Buy the house and then evict them. There's no rental agreement, so you can just say that you were unaware of the arrangement. Unfortunately, it doesn't seem there's a good way to screw over the people who deserve it (owner and/or realtor - whoever has been lying to you).

I am also wondering how much the mortgage rates are changing on you. Rather than extend you might have an opportunity to get them lower.

We actually purchased our house mid-March when our apartment lease wasn't up until June 1st. The seller was having trouble closing on his new place, and we let him stay for over a month in exchange for a bunch of furniture and yard equipment he was willing to leave us. It worked out great as we didn't have to pay for the stuff and still had plenty of time for renovations before moving in.

If you still have a place to live and aren't getting totally screwed by changing mortgage rates, you might consider just waiting until June to close and move in.

I'm definitely speaking with an attorney. I'd just like to hear from others with experience real estate if that's okay. Maybe I'm just venting, but I doubt I'm the only person who's ever had to buy a house on here. We talk about things other cars all the time, why is this any different?

We do have a commitment in writing since we're under contract that states the house needs to be vacant when we move in. Technically, the tenant's lease agreement takes precedent and he has until October...in which case the house isn't technically "vacant". If we let him stay, there's nothing stopping him from refusing to leave until then, unless there's something in the lease agreement. It's just frustrating hearing one thing and finding out it's only a half truth or flat out lie. I don't think full disclosure from my own real estate agent on a property we're buying was too much to ask.

I'm confused as to how the guy has a lease contract when it's not a legal rental property. I'd report the owner to the proper authority.

Also, I missed that you already put down a bunch of money. I would consult with the attorney and go from there. You may be at a point where you just need to not rock the boat.

Rates are still higher than when we locked. Doing so also means we lose out on discounts for the loan officer and having to start over. Our loan is pretty much good to go and we were hoping to close early. We honestly didn't think the tenant was an issue anymore until today. The attorney told us he could leave May 1st when we signed the contract, that's why we picked the date. We were given the impression that the date was set considering there was no objection of any type from the owner or their attorney when we signed. I get they legally have until June 1st, but doing so in nothing short of a **** move by not letting us know of their decision with the tenant until now.

I don't get that either. Is that lease agreement binding? Legal? If we report them to the town, it doesn't really get us anywhere. Just piss off the owners and they can end up not closing until June 1st regardless.

Going to pass this along to my father who is a Realtor in Texas, so he might have some info but different states & laws can apply.

First step is call a lawyer who specializes in home/rental.
Second you need to get a copy of any legal or illegal agreements that the rental person has signed or agreed to. If it is informal and just peoples word, then get it on record and if so a signature they agree that this is what is stated.

From this point on you need to collect a paper trail of everything and speak with an attorney asap.

What's the likelihood that getting an attorney and starting legal eviction proceedings will get The Professor out any sooner than June 1? My guess is "zero". In most states, he would have a legal right to a minimum of 30 days after being served eviction notice. Conceivably he could entitled to more if it's not a Termination for Cause. Sounds like he's trying to be a nice guy about the whole thing.

Easy there. I meant no disrespect. How hard would it have been to have mentioned that little attorney tidbit, just to clarify the "venting" component of your post?

What did the attorney tell you?


.

You need to think about the renter. He's the innocent victim in this. He knows he needs to leave and he's making plans to do so. Think about yourself in that situation. Is a few more days really going to make that big a difference in your life? Chances are you'll be there for the next five years or more. Are you even going to remember those 15 days 5 years from now? I'd work with the renter. Why d*ck him over and be a total jerk about it just because you can?

Sending you a PM now to relay some information to help.

I'm not trying to D*ck him over, the owners should have been responsible in letting him know about the sale. They had plenty of time to come up with a plan and we were told the tenant leaving wouldn't be an issue when we placed the initial offer. I feel for the guy, he's not to blame per say, but he is the issue that's holding up the closing. A 30 day extension for the rate amounts to about $1500. Not a lot in the big picture but still a good amount. I'm not trying to be a jerk. We were lied to and now we're going to end up losing money for no reason. It could have been avoided if they told us when he could really leave at the beginning of negotiations. We wouldn't have bothered locking in the rate had we known.

Sorry. Just really frustrated at the moment. Didn't mean to sound dickesh

Hopefully the stuff I sent will help, and this all can come to an easy close for the OP.

Can you have the seller knock the $1500 off the price of the home in exchange for you being understanding about it and not throwing the tenant out on his ***? I have no idea how landlord-tenant laws work in your state, so I can't comment on any of the legality of what's been done. I do think you need to report your realtor to the local licensing body for her mishandling of the situation after the close. There's no way she didn't know all of the details before you signed the paperwork.

I agree with reporting it or filing a complaint about the realtor if the OP really feels that he got fraudulently handled, but if I were the seller, my response, with signed purchase agreement in hand, to a request to knock $1500 off, would be something akin to a loud fart. A contract is a contract. The OP's contract was with the seller, not the real estate agent. If it's not in the contract, it doesn't exist, is what the judge is going to say.

The chances of even being able to "throw the tenant out on his ***" before his June 1 move-out date are negligible.

Here I'd argue that I entered into the contract based on a material misrepresentation of the property, but I don't know how NY deals with those issues. And if the realtor is related to the seller's agent, she knew details she deliberately withheld until after the contract was signed. That looks fraudulent enough to go the the disciplinary route with her. When I had my RE license, something like that would get you in hot water for sure.

Actually you would be wrong.
The real estate agent is a broker when selling/buying a house and is legally obligated to report all information. One of the forums required to be filled out is a disclosure of information and question 4 on this form is, is there a current rental agreement contract or person living in the house.

Also, by the sounds of it the real estate agent has lied about the tenant living in the house, be if they said they would move out on X date or there is no rental agreement so they will move instantly. This is a huge no-no in the real estate world, the people I have spoken with on this matter have said the real estate has basically open them up to a lawsuit depending on how this plays out because of how they have handled this deal.

Had I done something like that when I was a realtor I would expect to be the defendant in a court case very quickly.

That is what I was told, especially if they did not originally disclose on the listing there was a rental agreement or event a tenet then that is a huge issue.

Yep. Especially since she is related to the seller's agent (HUUUUUUUUGE conflict of interest) it would be hard to argue in court that there were no discussions between the two of them regarding the property and undisclosed information.

The MLS listing has it as a single family. There were other issues she lied about or mislead us into thinking. The house has a deck. When I asked her if it was permitted she said yes. When I did a FOIL request, I found out she lied. I send her the info and she doesn't even have the balls to call me. She has her husband call and say they knew it wasn't permitted all along. We went back and forth and the owners are giving us money towards it. Our realtor's husband also offered us $500 cash. We said okay because we didn't want to hold up the closing. Let's just say there are other instances with her that really frustrated us and it seems to only get worst.

Hit her for fraud.

Yep, this is fraud.
Honestly at this point, it will hurt but you need to get away from the deal. If you are going to lose money then lawyer up and tie them up legally so a) the house cannot be sold and b) you get all money back you lost.

Yep. All of that. The words you should be throwing around are "triple damages", at least here in TX.

Trust me, if we didn't like the house so much and there wasn't the risk of losing $10k+.. I'd be all for it. My fiancé feels the same way and when it comes down to it, we do want this house. This is our first home and to have to deal with this BS from the people who is suppose to be on your side is such crap! It feels like all she cares about is the sale and couldn't care less about the liability of the tenant or about the other issues that have popped up. She hasn't apologized once for anything. It's seems it's always us who has misinterpreted what she said. At this point, I don't think we should go after her until after the closing. We're also getting married mid-May and would rather not start things off with a lawsuit to think about. If the deal does go south, make no mistake. She'll be the first person to get sued.

I almost forgot about this thread.
Update for those interested:

After a ton of headaches, we finally closed on the house on June 10th. It was by far the strangest business transaction I've ever experience. It was like pulling hairs with every little thing. Every professional there said the exact same thing. They've never seen anything like this and it would be entertaining if it weren't so sad. The house belonged to the mother of 3 children, all in their 40's-50's I'd say and some have not spoken to one another in 25 years. The mom is 96 and they placed her in a nursing home. A very nice lady from what we've heard. Her kids on the other hand...

When we first got there, we met the "nice" sister who just wanted what was best for their mom. She was actually pleasant to deal with and we were glad to meet her. Her siblings however, were....how do I put it, lightly...greedy, money hungry trolls. It started off quiet, but then the husband of the "nice" sister had an screaming match with the brother. The other sister and brother started fighting also and each one had to be placed in a separate room. This really answered a lot of what we had to deal with and what the realtor and attorneys had to deal with. We tried to get them to pay for the rate lock extensions and a few minor discrepancies and they took it to a vote. The nice sister said yes and the other two said no. It was only $1500 total mind you. It was hard enough to get them all to the closing so we settled for the attorney, the realtor and our mortgage agent together giving us some compensation. They wanted this whole ordeal to be over as much as we did.

In the end, their true colors really showed and I hope they all get what they deserve. They split the proceeds after all the fees four ways.....and gave the mother a disproportionally smaller share...for her own house. Granted she may be dealing with Medicare, but I doubt the siblings were doing it as a favor to protect their mom. We could literary hear them fighting over the money in the next room. They were treating this like they won the lottery.

As for the realtor, I still hate her lol....but I do understand now how all this turned into a clusterfuck. She was being told one thing from one sibling without the other sibling knowing....and since the siblings didn't talk to one another, we ended up getting the dirty end of the stick. All in all, we ended up paying $1k more than we had to. As crappy as all that went down, we still got a great deal on the house. I was tempted to tell the old owners the house appraised for $30k more than we paid...but my wife said no, lol.

Anyway, I'm a proud homeowner and ultimately feel grateful for how everything turned out. I finally have my very own two car garage for my Z. Can't wait to fix it up into something more than a storage space. Thanks for all those who helped. Cheers!:)

Congrats! Now put it all behind you and move on with life.... no time to stress about the past! Hope you have many happy memories in your first home. :tup:

$1K is nothing in terms of the cost of a home. I think that's a win considering the clusterfvck and how things might have gone down.

Congrats on the new home and enjoy! :tiphat:

wow, this must be a real nice home and location. congrats for all the hard work. :tup:

:iagree:

Congrats! Having your own place is awesome!

This thread has been months long. But got hooked up my attention. A bit off for a car forum like this but i can relate on this. Just a year ago I encountered the same issue with the agent and was almost lost the money I paid for. If you're watching news with regards to the real estate agency, it would be best if you would consult your personal lawyer.