subject: How can I sell a house with tenants to avoid foreclosure? [print this page] How can I sell a house with tenants to avoid foreclosure?
The banks sent you "payment overdue" notices and now you want to put your house up for sale. Obviously you want to sell your home fast to avoid foreclosure. Ideally, you hope for your asking price, but at this point, you're even considering a short sale.
The problem
You have reliable tenants in your house. Can you sell the house with renters still living in the property you own?
The approach
You must first determine what kind of contract or lease you and your tenants signed. Is it a year-long lease? Is it a month-to-month contract?
The legal background...
With a long-term lease in the picture, you might want to wait for the contract to end. Please be very wary before putting your property for sale. In case your house hasn't gone through a foreclosure, your signed lease takes precedence. You could cajole your tenants into leaving or offer monetary incentives, but you cannot force them to vacate your house. Forcibly evicting tenants or not providing enough time for them to move can actually backfire.
In the past couple of years, new laws support renters and you might find yourself stuck in a lawsuit. President Obama signed the "Protecting Tenants at Foreclosure Act of 2009" on May 20, 2009. This legislation means that leases survive a foreclosure. In other words, the tenant can stay at least until the end of the lease and month-to-month tenants are entitled to 90 days' notice before having to move out. In the case of a month-to-month lease, undergoing a short-sale is much easier.
An exception was carved out for the buyer who intends to live on the property; this buyer may terminate a lease with 90 days' notice. The law adds that any state legislation that is more generous to tenants will not be preempted by the federal law. These protections apply to Section 8 tenants, too.
Another option...
You can always offer to buy out your tenant's lease. This is sometimes ample incentive to encourage their early departure so that you can proceed with your sale.
