Incentivizing tenant during sale of house instead of evicting?

Question

Background: SFR in MN I’ve owned 16 years. Tenant has been renting since 2015. Was 2 year lease that is now a month to month and she had been behind on rent for several years. Tenant always made payments, but always late. I worked with her while she was cooperative and kept the lines of communication open, but over time she fell further and further behind and would make payment commitments and then not follow through or just ignore me. It got worse and worse these last few months. Because I was in the middle of doing a cash out refi, I felt like my hands were tied so I didn’t want to evict her in the middle of it. The refi ended up taking 4 months to complete (that’s a story for a different post), but I couldn’t wait any longer to start the eviction proceedings even if it landed in the middle of my appraisal, which was almost how it all shook out. I gave her the 14 day pay rent or quit notice near the end of July. In the middle August she caught up on payments through end of July which was thousands in back rent. (Her boyfriend paid, which will come into play soon in the background). I had my appraisal a week later and the house looked amazing, 1000x better than I ever would have expected given how it had looked earlier this year and even a week prior. Gave the tenant another 14 day pay rent or quit notice for the August rent and two weeks later the boyfriend calls about making this payment. He was rude and condescending and tried to bully me during our phone conversation and again later that day in person when giving me the money. I’m pretty nice until I’m not and I was fuming after the years of generosity I had given my tenant. I don’t usually let my emotions make decisions, but I’d been on the fence for a while about giving her notice to move out so I could either 1031 the property, move back into it as my primary residence, or convert it to a by the room rental for a better return. Well that conversation with the boyfriend sealed the deal and at the end of August I gave the tenant a notice that the lease was up the end of September knowing I would likely never see a payment for Sept. rent and much of her security deposit will be used up on damages that were repaired for the appraisal. In addition, I gave her a 14 day pay rent or quit notice on Sept. 5th so that I could move up the timeline for eviction from October 1st to tomorrow. I had decided I was going to be holding the property for a while…except now I’m not. I’m going to be doing a 1031 exchange and it would be much easier and faster for me to sell it with her in it and it looking like it did a month ago for the appraisal. So I’m going to reach out to her and let her know that tomorrow marks the 14 days and I haven’t heard a word from her. In the past, this has generated a call saying she’s paying me in full. But since I gave her the notice to move out whether or not she pays, I don’t anticipate anything other than her waiting for me to evict her so I feel like from the get-go I need to approach her with something like, “The 14 days has passed and I have a proposal for you that I think would benefit us both, please give me a call.” I’d like to propose to her that I will waive some or all of the remaining Sept. and possibly a bit of October rent if she will work with me during the sales process, which would include her cleaning up the property to the same degree as was done for the appraisal, and I anticipate quite a bit of showings the first two days it hits the market and should see an offer or two out of those first showings. So my question is this: What would you offer her as an incentive in order to avoid the eviction process (both the expense and the time of it in order to get this house on the market more quickly) as well a higher sales price if it’s staged the way it was for the appraisal vs. shown empty? Do I request the September rent be paid upfront in order to avoid eviction proceedings and that I will refund the rent to her after she moves out if she agrees to the terms above rather than just waive the rent and hope she follows through? I plan to put any terms we agree upon in writing so there’s no questions if anyone doesn’t hold up their end of the deal. If you’ve read this far, thank you! Any feedback or insight would be much appreciated.

Russ B. · Answer

This is a common scenario - people that you spend a long time bending over backwards for and then stop, will hate you a lot more than someone who was mean to them from the start. The incentive idea may help. You might also point out that some of the screening tools in use these days can pick up eviction before the hearing even happens... Once it's filed, it can suddenly become way harder to get in anywhere else.

Barry Pekin · Answer

@Carrie Traxler,I'm sorry, but I didn't read the whole thing. :(However, a lot of it has to deal with your relationship, which seems to be somewhat deteriorating.I've heard it often works to do cash for keys. If you're going to offer her some sort of rent forgiveness, you could also consider paying her at the end. If you do X and Y, I'll give you $XXXX when it comes time to move out. You will get the money when as you're leaving.

Carrie Traxler · Answer

@Russ B. Yes, that is probably the most frustrating part of this entire situation that I have bent over backwards to help her these last four years. That is great advice about mentioning that some screening tools can pick up on the eviction before there's a hearing! Thank you.

Carrie Traxler · Answer

@Barry Pekin Thank you for your honesty :) The relationship is deteriorating is a much more succinct way to state the bulk of that post. If going the route of cash for keys, refunding the tenant AFTER she holds up her end of the deal and moves out puts me in a stronger position than if I offer the forgiveness on rent that was never paid. Thank you for the insight.