In escrow for property-Should seller or buyer pay cash for keys

[David P.]

Hi Guys,

Currently in escrow for a tenants occupied duplex in Los Angeles. We already got the tenants to agree to cash for keys to move out. They agreed to accept $2500 each (1 months rent) upon move out Oct 2020. Back story on the tenants-Both families are super covid fearful and not allowing anyone inside the property at all. No buyers/inspectors/apprasal period. Good news is i already have inspection/apprasal reports of when it was in escrow in Feb 2020 and the numbers all still make sense. Im getting the duplex 100k off list price while majority of properties in the area or selling over list. Problem right now is the sellers do not want to front any money at all to pay the tenants upon move out. Its is a complicated situation where 7 family members own the property and none want to come up with the cash. I already agreed to compensate the cash for keys and add the extra $5k to my total cost which they will get at closing. The sellers do not want that and rather want me to pay the tenants upon moving out because they have no money to give (its hard to believe that).

In my mind I think it would be a huge risk for me to front the $5k to the tenants before i close correct? The day the tenants move out will be the first day I will enter the property to look inside. I already seen some pictures in the inspection/apprasal report and know a good idea on the repairs. My main concern is not being 100% confident in being able to close. You never know what these lenders may say until the loan fully funds and i am out $5k. I do have loan contingency until end of escrow so my deposit is not at risk. Do you guys have any suggestions on what i should do?

I had a few ideas but neither sound like solid ideas. One was for the seller to provide the tenants last month free instead of paying them cash at end. That idea can work against us in case the tenants try to abuse it and stay longer. Another was to ask the sellers to hold onto last month rent and repay it back upon cash for keys. Its a complicated situation where 7 family members are fighting for the proceeds of the sale through the courts so i think that is a big reason they don't want to come up with money on their side.

My main selling point is to let the sellers know that since the tenants  are not allowing anyone into the property  it will cause an issue for any potential future buyers and not just me and that they should just be happy im willing to help them recoup the cost of cash for keys.