Marge and Dp2 - I'm not comfortable taking possession with tenants still in place. It is my understanding that California law favors tenants and that it could be a difficult and expensive process to actually evict them. Also, the sellers really don't have any money - the listing agent said "they have nothing in the bank and are maxed out on credit cards" - so asking them for an impound and/or to cover the cost of extension of escrow and of my rate lock (which expires 4/8) is pointless since they don't have any money to contribute.
I made it clear to my agent that I'm not negotiating with the tenants and that the listing agent should not be negotiating nor communicating with the tenants. I said that all tenant communication needs to be directed through, and communicated as coming from, the seller. It is my impression that the sellers gave the tenants (their in-laws) the contact information of the listing agent and that the tenants have been speaking with him/her directly.
It is an unfortunate situation.
Any other advice?
You could require the seller to resolve this matter as a prerequisite for your closing. Another option is for you to require the seller and the current occupants to sign your (attorney drafted) lease--which could contain a stay-over penalty (equal to the costs that you'd incur as a result of the stay-over)--as a prerequisite for your closing. A third option is for you to require the seller to create an impound sufficiently large enough to cover all of your costs to hold the property and evict the current tenants as a prerequisite for your closing.
The point is that you'd be helping the seller to realize that this potential stay-over has some real costs (for you and them). Plus, they might lose a lot more provided you opted to pursue other opportunities provided both parties couldn't negotiate an acceptable arrangement.
Turn your agent lose.....
The problem that exists was neither created by you or should it be resolved by you. The criteria that will define whether or not your transaction closes and not defined by you as well.
The fact that the tenants(???) have to be out by a specific time is a problem that belongs to the current owner. It may be time for your agent to convey in writing expectations and deadlines for this transaction to be brought to a satisfactory completion.
It's definitely time to put the seller on notice.........
- As we have just discovered that it is tenant-occupied, no other agreements exist that stipulate anything about tenants, vacancy, or the property transfer.
- The tenants are aware that the property is being sold, are aware of the length of escrow, and have been given some sort of notice (there were moving boxes present in the home during inspection and the tenant was complaining to us about only having thirty days to find a place to live), but it is unclear what sort of written notice was given, if any. It is in fact very likely that no written lease exists and no written notice was given since the tenants are in-laws of the sellers.
- When we first received the seller disclosures, the checkboxes for "is" and "is not the primary residence" were both blank, among a number of other items. We immediately returned the disclosures, without signing them, and asked that they be completed. We did not receive the updated versions until after the home inspection, after we had already discovered it was tenant-occupied. The listing agent's inspection section on the updated disclosures states that the sellers have never lived in the home.