Should I keep seller in house as new tenant?

I am closing on a house next week. The seller will go into forclosure if not closed by the end of FEB. We got a great deal on the house because she needed a quick sale. My Agent just asked if we could consider keeping the seller on as a tentant for a couple of months since she hasnt’ even started packing yet and needs a month or two to find another place to live. I think she is thinking of us charging her just what our payments would be so we are not out any money… but I think we should charge her what we were going to rent it for.

I’m also not sure what to do about the deposite… I will make her pay a deposite, but what rights do I have when she moves out??? The house is quite a dump right now. She has 4 little kids, 7 cats and a couple of dogs. I am expecting that she would move out and leave the house as a dump and we would have a good bit of cleaning to do. She pretty much sold it “as is”… but if she is to stay on as a tenant for a couple of months, would I be able to keep her deposite if she doesn’t clean it up when she leaves???

I’m not sure what to do. My agent did tell me that she should have enought proceeds from the sale to hold at time of closing for her to prepay the rent and deposite for the 2 months if we agree to it. But again… how much to charge for rent? Payments should be about 550.00, but we had planned to rent it for 800.00. What is fair. Or should we just say she needs to be out and we take posession at closing like orinally agreed?

:cool well a hard call >>> if it was me i would have her do a rent contract for the two months and no longer end of deal deposit no as how will you tell what was new trash and old trash and i would charge her just what you would any one else >>>> as this is now your rental home ((( nice of her to sell you her nightmare at a good price but it is none the less yours now ))))

charge her a market rate for rent unless you’re feeling generous then give her a discount. have her sign a lease agreement just as you would anyone else. as for her security deposit, you’re buying the house in as is condition so when she moves out she would only be responsible for leaving it in the same condition. you’re not going to get to keep her security deposit just because the house is a mess, its your house and you accepted it in that condition. leasing the house to her for the short time period would be a courtesy call on your part.

The truth of the matter is that the tenant could move out by the end of February if she wanted to. What will probably happen is that the tenant will stay and refuse to pay rent - THAT IS EXACTLY WHAT SHE HAS BEEN DOING TO THE BANK!!! If you allow her to stay after the closing, you will probably have to evict her. Get a BIG deposit. Plan on losing a month or two rent; having the house left a mess IF YOU ARE LUCKY; and spending money on the eviction. The tenant can’t pay the mortgage, why should she pay you?

I would insist that she is OUT before you close, or plan on taking a significant loss when she doesn’t pay and must be evicted.


Hello SAHM,
I have heard never to let the seller stay in the house because there is more liability for you. Lets say at the end of the lease she doesn’t want to move out and files a lawsuit stating you took unfair advantage of here. Because you would be a landlord you would have to go through the court process before you could evict her. You want to benefit from her staying there so bumping the payments up a hundred or two would be understandable. Have you considered doing a lease-option with her? this would give her more pride of ownership so she might not trash the house as much.

My first thought was to say no because she has not been paying and why would she suddenly start paying MORE to live in the house than what her house payments were?? The only reason I’m considering it is my agent said they could hold x amount of dollars in an escrow account to pay her rent and deposite for the 1-2 months (however long we agree on). I was more concerned with what I could expect and legally require from her in terms of clean-up when she left. But now I’m worried…what if she doesn’t leave at the end of the agreement!! I never really thought about that. But it is going to be hard to find something CHEAPER than what her house payment was …and something big enough. This is a nice size 4 bedroom house with HUGE fenced yard, huge deck, 2 car garage… She would be lucky to find a 2 bedroom for what she has been(or not been) payiing for morgage. How is she going to find a place to rent that will fit 4 kids and all those pets? The more I think about it, the more I’m afraid she might not leave and I would have to evict her.

But just out of curiosity… why could she sue me for taking advantage of her??? I’ve never been in this situation before, so maybe I’m missing something, but I’m curious in case this ever comes up again.
Thanks for all the input.

I mentioned her suing because it is always a possibility with foreclosures. The seller could come back after the sale and say the investor took advantage of her situation. Not saying she would win, but its a possibility. (The judge would probably look at how much equity she had in the property and how much she got out of the deal). I wouldn’t let that stop you from going through with it I just wouldn’t let her stay in the house after the sale!!!

I would definitely not let her stay…you said that the house is a dump already and that “She has 4 little kids, 7 cats and a couple of dogs”. That is a recipe for disaster. Keep your clean up costs at a minimum!!! Get her out of the house ASAP and clean it up then rent it or sell the house for your profit. Don’t let her pressure you or make you feel obligated to let her stay. SHE GOT HERSELF IN THIS SITUATION. Remember, you are already helping her out.

What you could do (which could definitely make her loose in court if she tries to sue later) would be to help her get into an apartment, (she should sell her animals because she cant afford them, tell her the facts straight up and try to help her out). Sorry if I keep going on and on but it seems like you have a good deal here and I want it to be a success for you!!!


Have you read Thomas Luciers “The preforeclosure Property Investor’s Kit”? If not you should definitely pick up a copy!!!

-Seems like a great deal…Good luck!!!:beer

It seems like you are getting emotionally attached. Think about it straight -

  • Do you have any advantages of keeping her in over brining a new person? No you do not.
  • Do you have more potential problems by keeping her in instead of bringing a new person? Yes you do.

Set emotions aside - it is business. Other posts are right - if she has not paid the bank, why would she pay you. Also, she may start complaining to authorities about the state of the house - once she becomes a renter all the problems with the house will be yours. When it comes to eviction a judge will not look favorably at someone evicting a mother with four children.

When it comes to eviction a judge will not look favorably at someone evicting a mother with four children.


I agree with everything you said except the above. You can evict a mother with four children without any problem. The legal issue is whether the tenant paid the rent or not. I set out a young girl with a baby (that we evicted) just this week. The temperature was near zero and we had a few inches of new snow. None of that is my problem. I didn’t evict her because I’m the big bad wolfe. She made the choice to become a heroin addict and cause a bunch of trouble. She made the choice to act so bad that Section 8 terminated her voucher (at my request). She made the decisions and is paying the price for those decisions.

There are probably some socialist areas of the country where some wacko judge can prevent you from evicting a non-paying tenant, but thankfully that’s not in Ohio (and shouldn’t be anywhere). If you couldn’t evict young women with children, no one would rent to them.


While it sounds like you are protected since you’re holding back funds to pay her rent it still sounds like you’re leaving yourself open to have her stuck there way past the final date. I would just have her out by closing and have a dumpster on standby to get it ready for a REAL tenant.

This is called a Leaseback transaction. I have heard of some investors having success, but each of these investors also tells some really bad horror stories where they have been sued by the seller turned renter.

One investor I know now has the closing videotaped so it clearly shows that that seller turned renter knows that they are indeed selling their home.

WHY GO THROUGH THIS HASSLE? If they move out, they have no argument that they thought they still owned the property.

Want to help, get a rental for them in another home. They can’t afford the one they are in now. Feel bad for them, YES, but in the end they are the one that got themselves into a foreclosure situation. You are helping by buying the home as it is.

Holy cow!!! We just found out that we will be closing on Friday. It is clear to close NOW, but my Husband is out of town until Friday. My real estate agent (also sellers agent) called me today to ask what I wanted for rent… This lady has no intention of moving out by Friday. She has not even started packing. I said I was renting it for 800.00. I was told there was no way I would get that much out of her. … Whatever lady… its my house now!!! I did not take advantage of her in any way. She put it up for sale because she new it was going to go back to the bank if she didn’t . She was asking 69,000 for the house and I’m paying her 67,000. So it’s not like I’m ripping her off with a total low ball offer. The house is worth about 20,000 more, but She is the one who set the asking price because she needed a quick sale. I’m just the lucky one who saw it first. I happen to know that she is still making about 5,000 even after paying the agent commission, so she has money to get into some other place!
What should I do?

Personally, I would pass on the “deal”. It is not a positive cash flow deal with a purchase price of $67,000 and rents of $800. It is more like a break even deal and $20,000 equity is not a lot of equity for this rental. Having the trouble ex-owner in the house would definitely make it a deal brealer for me. She probably will not move out or pay rent and will very possibly sue you. Thanks anyway!!!


if you close, this will explode in your face. if you think this tenant is going to pay rent or move out, then you’re crazy. you about to commit the #1 mistake in preforeclosure buying.

Have your agent do a holdback at the closing. Usually we make it painful so hold back $2400 which would be 3 months rent and she gets it when she moves out minus a per diem based on the $800 a month rent. That should give her $2600 to go find a place to move to.

As for Mike’s thoughts, his rules work for his state, but they don’t work in all situations. I’d probably agree that it’s not a great deal, but then great deals are hard to come by on a regular basis. I’d say it’s a fair deal. I think you also need to take into account that the mortgage payment does pay some of the principle so you are making a profit even if it doesn’t show up in cash flow. You also get to write off depreciation, but as it’s based on the property value minus the land value and only amounts to 1/27.5, at best it’s worth about $2000 divided by your tax bracket. So after taxes, you’ll probably break even or make a little. You’ll probably make your money when you go to sell this. Hopefully the market will improve in a few years. There’s actually sections of the country where housing prices are still going up and those are the areas that have housing prices people can actually afford. After a while, not too many are left that can afford 300-600k properties.


My “rules” are not really rules at all. They are simply mathematical equations that calculate the price at which you need to buy a property to actually make a profit with rentals. The equations work in every area, although it may be difficult to buy a property at the required numbers in overpriced “balloon” areas. This house is not in a “balloon” area, the value is only $87,000!

And you’ll note that we both came to the same conclusion. You said that it was a break even deal and so did I. So, the question is whether it is worth dealing with a tenant who won’t leave and possibly being sued for a break even deal. I’d say no. The risk is not worth the possible reward.


If you look at it strictly as a cash flow analysis, then it probably doesn’t make sense. However in order to make money, you need to take risks. There is some nice equity in the property that you don’t normally get and that perhaps you haven’t taken fully into account.

Investing is not a risk free endeavor, there’s lots of investor properties that have ended up in foreclosure for one reason or another. You can go low risk and only do it when the numbers look right. That is not going to happen too often because someone else with a higher risk tolerance will outbid you in other areas of the country.

The question in this case is whether the equity is really there. The appraisals always come in higher than the sale price, but will someone actually pay that price is the question. Only someone local to your market would really know those answers.

I’m not sure about all the cash flow analysis stuff. I just know that our payments will be 550.00 with tax and isnurance. So the 250.00 cash flow from the rent sounds good enought to me.
We are also in an area that has not gone crazy with houseing prices yet, but is headed that way. We are on the Iron range in MN and ther is millions of dollars being pumped into the mines right now and we are expecting a huge increase in jobs and workers in the next few years. Most of whom will want rentals. House prices are starting to really go up around here too. We bought 2 little 2 bedroom houses last year for about 37,000 each and 1 year later comparable houses are now going for about 57,000.