The contract you received on your rental property looks good. The buyer does, however, need a loan in order to purchase. There’s also a tenant in place; lots of balls in the air. Your REALTOR® explains that tenants are entitled to a 45 day notice to vacate. Being the faithful reader that you are, you recall that appraisals take about 60 days to complete. You do the mental math and realize that 60 days for loan approval and 45 days for tenant notice equals almost 4 months from start to close. Anxious to move things along, you ask the seller to give the tenant notice right away. Unexpired leases, the need to continue generating rental income and the risks of leaving a property vacant normally deter an early notice to move.
In fact, most owners want to avoid telling the tenant that there is a contract on the property until things look solid. Problem is, tenants often decide to move as soon as they know there is a contract pending. It’s tough to avoid early “notice.” After all, they are right in the flurry of activity that occurs during the initial stages of a contract.
Bottom line, the issue of when to give formal notice to vacate requires some thought. The conservative approach favors delaying notice until loan approval but the reality is that your buyer’s loan lock may expire prior to the end of the 45 day notice period so this approach isn’t very realistic. Once the loan is set, buyers are normally anxious to complete the purchase. Generally, the faster a transaction can be closed, the better. Although tenants will sometimes agree to move early, they are not obligated to follow through. They could still invoke their 45-day notice entitlement even at the last minute. Once the major pieces of the loan puzzle are in place, a competent lender should be able to predict that the loan will proceed to closing. Giving notice at this point can be done with some peace of mind. It’s an issue that must be carefully addressed at the time the contract is negotiated.
Each situation is different. Buyers should be extremely cautious in trying to establish timelines that will fit. If not, there’s a good chance that you may “notice” that the tenant is still in the house at closing!