Necessary Precautions With Contract
Buyer is interested in purchasing my house for sale. Buyer is not questioning price since it is selling at $54 sq ft as opposed to all other homes selling for $56-$57 sq ft. We purchased at a deep discount and have rehabbed the house.
Question: buyers will receive in 8 weeks a settlement w/FEMA. It seems the home they own and are currently living in has flooded. The would want to close when the settlement from FEMA arrives. This would mean 2 more mortgage payments for me to pay while I wait and if I sign a contract, I would be taking the house off the market. Their verbal offer came on Sunday; Monday, their home flooded again when parts of Houston received 8 inches in one hour. Now they are anxious to accelerate putting a contract on the house and taking occupancy during the next 8 weeks as renters before the FEMA settlement arrives. Buyers state FEMA is willing to write a letter verifying the amount of the settlement.
Would I add an addendum to the sales contract indicating a lease agreement in addition to a required earnest money deposit?
Should I not allow them to move in until the house closes even if they are willing to pay rent?
Just to new to know the pos/neg of this situation.
Consider a lease with an option to purchase. You could take the earnest money (and I'd take a couple thousand here) as option consideration which can be applied toward the purchase price. At the time that their settle money comes in they would in essence exercise their option to purchase the property and terminate the lease. Because of your willingness to accomodate you might even charge above market rent (and apply a portion of it towards the purchase price when they purchase).
I've always heard that it's a bad idea to let a prospective buyer move in before closing. But then, we're talking "creative" stuff here, right? There's no way to guarantee that they will use the settlement from FEMA for the purchase, is there? Like the previous poster stated, I would get as large deposit just in case they don't follow through. Have them sign SOMETHING that protects your interests, and be prepared to evict it they backpedal.
I agree with Jorge, do a lease option. I would require at least 8k down, so if they don't complete the sale, it hurts. Also most lease options are for 1 year, make yours 120 days, that way you can get them out faster if they do not produce and you make 8k for a 120 day rental.