We bought a short sale with a tenant in it and he quit paying

Question:  We bought a short sale with a tenant in it, and he has stopped paying rent. Did we make a mistake by not getting a credit check? Our real estate agent did not advise us to do so, and we wish we had. Help! Rana and Colin S.

Buying a property with tenants in place blog by professor Leonard BaronAnswer: Sorry to hear about this issue. Hopefully you can get it resolved amicably without too much pain.

Regarding whether you made a mistake by not getting a credit check: did you research the tenant?

Did you ask the seller for copies of cancelled checks to verify the current tenants were paying rent?

Did you ask for an estoppel certificate signed by the tenant to verify lease terms?

Did you check the owner’s file to see any past credit report from when the property was leased to the tenant? If you verified these and they were fine, then you probably could have assumed all was okay.

If you did not take any of these steps, then absolutely you should have required a lease application from the tenant and/or pulled a credit report. Alternatively, if their lease was month to month, you might have requested the seller terminate the lease and have the tenant vacate the property before you closed escrow.

Many buyers do not perform any of these actions, and sometimes they end up with tenants that become a problem and default on the rent/lease.

Regarding whether the real estate agent not advising you to pull a credit report: Everyone wants to blame their real estate agent – but you are the investor and it’s your responsibility to educate yourself about and handle these issues. The agent’s job – unless you contracted them to manage the property, too – is to help you buy the property, get the seller disclosures required by law and/or that you request, and facilitate the transaction.

A real estate agent should never do your due diligence. That’s your responsibility, not their liability.

Again, I’m sorry to hear about this issue. Hopefully you can resolve it, and chalk this one up to a lesson learned. I’m sure you won’t forget it for a long time. Good luck.

This article courtesy of Zillow. Read full article here.

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