Never Make Your Buyer Your Tenant

by | Jan 16, 2020 | Purchase Agreements, Real Estate Law

With home sales activity increasing throughout the country, sellers are feeling excited about better prospects. Some national mortgage programs are less restrictive than in recent years, and buyers needing home financing feel relieved. Despite optimism, sellers and buyers must still keep their wits about them to avoid making silly real estate mistakes that can have financial or legal consequences. Making your buyer your tenant (“buyer/tenant”) is but one avoidable mistake that sellers often make.

Understand that selling a home can be a lengthy and often frustrating process. Perhaps a seller is seeking a short sale with their bank, or a buyer’s financing arrangements hit a snag. When things don’t go as planned, eager sellers and anxious buyers may consider allowing the buyer to move into the home before a closing. Regardless of pressure from the buyer, their real estate agent, or your own good intentions, here are four reasons a seller should never let their buyer become their tenant.

Landlord/Tenant Relationship

When a seller allows a buyer to move into the subject home before a closing has occurred, they now have created a landlord/tenant relationship. And like some tenants, they may not pay rent, or they don’t leave when they should. So when a buyer in anticipation of securing a mortgage is later denied, the buyer should leave the home voluntarily, right? If they refuse to leave, then the seller must legally evict them, since their buyer now has the same rights as a tenant under the law. Unless there is a mutually beneficial relationship that remains after the buyer’s financing falls through, there is no further reason to allow the buyer to stay in the home.

Buyer’s Remorse is Quickly Amplified

The excitement of buying the seller’s home is short-lived. The buyer/tenant now living in the home may notice the little things that they may have overlooked when they first fell in love with the home, or they realize a deficit in their earlier buying decision. Perhaps the location isn’t as good as they thought, or they found a cheaper home, or worse, they met your neighbors. As “tenants”, they are free to look elsewhere for a more “suitable” home.

Don’t Let Buyer “Test Drive Your Home

Once the buyer moves into the home, unless specifically stated otherwise, the seller is obligated to make any repairs to the home while both parties are awaiting the closing. Suddenly, items that would normally be a new buyer’s “wants”, become their “needs” and at the seller’s cost. From having simple blinds replaced to having a furnace or air conditioner replaced, a sharp buyer won’t close on the home until their “needs” are met. Don’t be a sucker and let a buyer “test-drive” your home.

Don’t Store Buyer’s Items Before Closing

Often, there may be a small window of time between the buyers moving from their former residence, and the time for closing on the new home. When the buyer’s real estate agent asks if the buyer can store their items in the garage before the closing for a few days, be careful. Resist the temptation. If the sale does not close, will the buyer remove their belongings from the garage? If so, when? Next week? Next month? Next year? If and when the buyer does remove their items, is the seller prepared to answer for the disappearance of a priceless heirloom that was allegedly in the buyer’s belongings, now termed “antiques”? Should the seller have to underwrite the risk posed by storing the buyers items, now “treasures”, in their garage? Avoid the needless headaches and pass on this request.

Real Estate Agent vs Legal Professional

Seek the advice of an objective legal professional. Yes, there are good real estate agents out there. They are essentially the salesperson that ushers a buyer and seller through the home sale process, and good agents make the job look easy. It isn’t. But despite these accolades, agents are still commissioned sales and marketing people. And what may be good for them and their clients may not be good for you. What happens when your deal doesn’t close? If the buyer/tenant fails to leave voluntarily, the agent will not be paying for, nor performing the eviction. If the buyer/tenant destroys the inside of your home, you will be paying for repairs to get the home back on the market. If a buyer fails to remove their items from the property, you will be hauling these items away, or walking through a mess every day. Not the agent.

Don’t Become Unwitting Landlord

No one says that the buyer/tenant relationship is completely untenable. Certainly the examples above are provided for the seller to stay alert and take precautionary measures. Sellers need to obtain maximum protection by consulting with outside real estate counsel so that they may protect their biggest investment, and themselves from becoming an unwitting landlord.


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Real Estate & Finance Attorney

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