Help! -Financing Problem- What Are My Options.
I bought my first rental property (Duplexs)in late July and inherited Tenants and the lease agreaments that go with them.
I am supposed to be closing on a single family home that has a ARV of about $105,000 and I am paying $82,000 for.
I am using convential financing and my loan broker is a friend of mine. He needed a copy of the lease agreament for income verificaiton along with all of my other pay stubs, and etc.
He just told me today that the lender is not accepting the lease agreament because they have the old owners name on them, not mine. He asked me to get all of my tenants to sign a new lease today so that we can proced.
The lease agreaments are month to month and I have planned on getting the tenants to sign a new lease agreament soon. I plan on raising rent $20 month when I do this.
But on early Friday morning one of my tenants called me with backed up plumbing. I called a plumber on Friday and it turned out to be the citys backup. It took until Saturday night for me to get the problem solved and get there plumbing working again. They are very upset becasue they whent two days without working plumbing. I did every thing reasonable to fix the problem ASAP.
My point with that is This would not be the right day to ask them to sign a new lease and raise the rent. I want to give some time (a week or two) to let them get over it.
If I don't get new leases tonight and therefore can't close will I lose my earnest money?
If I don't get new leases and can't close will I be responsibel for paying for the Title Search, Apraisal, survey, and etc, that has already been done and I would be paying for at closing?
What would you do in this situation?
Leases stay with the property. A month to month lease signed 10 years ago by four owners ago is still valid.
Do your leases have the home phone numbers of the tenants and do you think that the lender would contact the tenants to verify the lease?
Brenda
I agrea that the leases should be valid - if they were a 1 year lease instead of month to month haveing tenants sign a new one would not be an option.
But the lender is requiring a new lease with my name on it for income verification.
Do your leases have the home phone numbers of the tenants and do you think that the lender would contact the tenants to verify the lease?
The lease used by the previos owner does not have the phone number on it. Most of the tenants do not speak English to further complicate communication.
If financing prevents me from closing on this deal am I entitled to earnest money back? What about paying for appraisal, survey, and etc.?
Suggest:
1. Get new rental agreements ASAP, if month to month, you can raise the rent with a month's notice.
2. Are you responsible for all the costs incurred on your behalf? Of course!
3. Could you Lose earnest money? Depends on how your purchase agreement was worded. ..If contract was "Contingent upon obtaining new financing" and you can't ... you should get your Earnest Money back.
seems to me like you have an opportunity to create a win-win with your tenants. Let them know that you planned on implementing their new rent rate ($20/mo or more increase), but you decided to help soften the problem caused by the city that you are waiving the increase - and clearly point out that this will save them $240/year.
I too don;t like to waive increases, but i think the true benefit you will enjoy by giving your tenant a break and getting your financing done will more than make up for the lost revenue.
Tell your broker friend to support the current leases with the HUD 1 of your sale. As the new owner the tenants and their monthly payments transfered with the sale. You must be prepared to package the deal for the underwriters. (logical underwriting is your goal...you may need to provide hand holding to your friendly broker)
Eric & Rosa
[addsig]
Usually, if you did not pay for the survey or appraisal up front, then you do not have to pay for it if the deal falls through. But really, you are responsible for their fees.
If your contract had a financing contingency, then you should get your earnest money back.
I have never done it, but I have heard of people who fabricate leases.
I appreciate all the responses I got. I whent ahead and asked tenans to sign new leases last night without donig the rent increase.
Hopefully it will be smooth sailing from here.