Lease transfer with home sale

[Account Closed]

Does anyone know the best method to securely transfer a lease and security deposit during a home sale? I have a friend whose property in northern Virginia currently has a 2 year lease on it, which most home buyers will not go for. However an investor would and can produce between $400-$600 monthly NOI. Haven't found anyone interested so far however when the time comes we are trying to figure out the best approach for safely transferring security deposit and lease without any issues. Would Estoppel suffice?

[Jon Holdman]

Leases run with the property even with a sale.  So, there is nothing to do to transfer the lease. It simply remains in force after the sale.

The security deposit and partial month rent would show up as a debit for the seller, credit to the buyer on the HUD-1.

An estopple letter is useful to the buyer.  It outlines the key terms of the lease, and is signed by the tenant.  Its a way to avoid situations after the closing where the tenant says "yeah, I know the lease says $1000 a month, but we had a verbal agreement for $800."

Also realize that investors will typically pay a lower price than an owner occupant. You certainly will not get any premium for selling an already-leased house to an investor.  So, it may be more profitable to see if the tenant would take a buyout to leave early and then sell it to an owner occupant.  Especially if its in a homeowner area vs. a rental area.