Home Buying in Dallas>Question Details

A Lu, Other/Just Looking in Dallas, TX

Purchase contract that involves tenants

Asked by A Lu, Dallas, TX Thu Sep 20, 2012

Hello Realtor community,

I am doing a buy transaction on a home that has tenants and this is my first transaction involving tenants

I have a simple question. In the purchase contract do I need to include any clause for the lease transfer to the buyer or is this pretty much to be handled between the buyer and tenant after closing.

Also, would you be willing to share any due-diligence clauses that you have used in a purchase contract as a buyer's agent, in a home that has existing tenants. The buyers primary motivation to acquire a home with tenants is for the cash flow.

Thanks for your input.

- Fellow agent

Help the community by answering this question:


Hi there,

I have handled a few transaction invloved with tenants.

This is more of a Title Company's job so please be sure to send the title company a copy of the lease.

The major reasons are:

1) Title Company needs to send a letter to notify the tenant that there is a ownership changed

2) Title company needs to reimburse the security deposit to the buyer and debit it to seller on the HUD and please make very sure they do that. It will become a major issue after it closed!

Good luck with the sale. I know it can be tricky.

JP and Associate
1 vote Thank Flag Link Thu Sep 20, 2012
You don't need to include a clause for the lease transfer. That's automatic. However, you still may want to cover that in your offer.

No, it's not handled between the buyer and tenant after closing. The lease transfers. Whatever is contained in the lease now--including amount to be paid, termination date, and other provisions--becomes the responsibility of the new owner and remains the responsibility of the tenant.

Tip: If you're buying a house with tenants already in there, make sure that their security deposit is transferred to you. When they move out, it's the current owner's responsibility to refund the security deposit (minus any legitimate deductions).

If you're buying for cash flow, ask for documentation from the seller for the last 3 years on income and expenses. Schedule C of their 1040 works well; no one is going to inflate their income or minimize their expenditures. That'll tell you pretty accurately what the true income and expenses are.

By the way, I question whether you're a "fellow agent." The questions you've asked are understandable from a buyer, but not from an agent. Nothing wrong with admitting who you really are.

Hope that helps.
1 vote Thank Flag Link Thu Sep 20, 2012
Don Tepper, Real Estate Pro in Fairfax, VA
Realtor would be required to represent you due to legal issues or refer to an attorney

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0 votes Thank Flag Link Thu Sep 20, 2012
Thank you Dixon for the info !

Another clause I would like share, that I got from an agent:

i.e. the seller to not change lease terms with existing tenant without written consent of the buyer.

I have also read about estoppel letters but I think it is primarily used in commercial transactions
0 votes Thank Flag Link Thu Sep 20, 2012

Thanks very much! I appreciate your responses.

I was looking for general guidance as I have never done a transaction involving tenants and I did not get a good response from my broker on this question.

Who better to guide me than fellow Realtors ;)

Thanks again!
0 votes Thank Flag Link Thu Sep 20, 2012
You really need to talk with your Broker on how he or she wishes for you to do.

0 votes Thank Flag Link Thu Sep 20, 2012
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