What is a Gentleman's Agreement & can it be wholesaled?

Question

I need some direction. A homeowner emailed me from my direct mail marketing. She states she wants to sell her home, however, the tenant won't let her get into the property. She said that she has told the tenant they have until the end of September. She sent a certified letter, which the tenant signed for. And then two follow up mailings/emails where the tenant did not respond. She said there is no lease, but a 'gentleman's agreement', which I am not familiar with. She said the tenant has lived in the home for 4 years, but is currently 3 months behind. What, if any, are her options & is there any way possible for this to be my first wholesale transaction? How can I give her an offer if I can't get into the property. All help is greatly appreciated.

Thank you!

Roland Paicely · Answer

First off let me state that I don't know the tenant/landlord laws of Virginia. However, there is probably a common thread among all states. With that in mind I'd say that since there is no lease. It is a month to month rental. Since the tenant hasn't paid in 3 months. The landlord must have her evicted. I don't know how long that takes in Virginia. Can you still wholesale this property..........Yes! There are some investor/buyers that will take on a situation like this. But it has to be a very good deal.

The 'Gentleman's Agreement' usually refers to when the contract is verbally understood, nothing written. In this instance. It sounds like the eviction process should be pursued.

The 'Gentleman's Agreement' usually refers to when the contract is verbally understood, nothing written.  In this instance. It sounds like the eviction process should be pursued.

Roland Paicely · Answer

No, the eviction doesn't need to be completed in order to wholesale the house.  Simply let the investor/buyer know that a tenant is living in it and there is an eviction happening.

Don't worry about seeing the inside.  That's another point to tell the investor/buyer.  Keep in mind that since there is an eviction going on and there is no way to see the inside.  The investor/buyer naturally will want a better deal than usual.

Regarding you being protected.  Make sure the seller knows what your plans are and that you are not the final buyer.  The same goes for the investor/buyer.  Let them know that you are wholesaling it.  That should cover all of your bases.

Don't focus on or worry about the tenant evictions situation.  It is what it is.  The investor/buyer will be aware of it and know what he is getting into.

Debra Grumbach · Answer

The homeowner doesn't HAVE to do the eviction. You could contract on it knowing you have to evict. Obviously that should affect the offer price. If the eviction process is pretty straight forward in your state, maybe you take that problem off her hands. Maybe you ask her permission to talk with the renter, without divulging your interest in the property, and see if you can get inside. Yes, there are legal ways to do this. Maybe you can get some pertinent info about the owner in the process. Can't hurt to try. What does the owner need out of the sale (time, elimination of a headache, $, etc). Maybe you offer the tenant $500 to be paid as long as she is completely vacated by noon on  X Date, no more damage than there is now. Maybe the tenant can't afford to move, or needs a good referral to get into a different place. Sounds like the landlord is "running scared." She absolutely has every right to enter the property with notice. She absolutely should be proceeding with the eviction. But if she is unwilling to stand up for her rights as a property owner, it may be time for someone with the fortitude to deal with "the issue," to step in and take the problem off the landlord's hands.

Roland Paicely · Answer

The bottom line is that you will need to get an investor/buyer that is fine knowing that there is a non-paying tenant in place.  The owner doesn't have to do the eviction first.  It does make it easier to wholesale.  However, as I stated there are investor/buyers that will still buy.  FYI, it may not matter if the owner gives the tenant until the end of September.  She has to follow the eviction process.

Regarding your offer.  Touch base with a real estate agent and have her do comps for the house sight unseen.  This isn't an exact science.  Especially, since you have no idea what the inside looks like.  But with the agent's info.  You will have your best guess.

I don't know what investors in your area consider a good deal.  Take the value that the agent gives you, subtract 30%, subtract repairs amount (guesstimate), subtract your profit.  That will be your top offer to the seller.  Now you will find out how desperate she is to sell.

Keep in mind that I don't know your market.  Is it hot.  Is it cold.  What sells fast etc.

Good luck.

Christopher Phillips · Answer

@Tiese C.

In real estate, everything has to be in writing. Oral agreements don't hold up in court.

If you try to lock it up without being able to see the inside it's a big risk unless you have buyers willing to take it on. Investors have different opinions about buying occupied homes.

Tiese C. · Answer

@Debra Grumbach-- thank you for the information.  I don't get it either.  I  don't know if that's because the homeowner is out  of state & she is doing everything via phone/email.  I just don't know.

I did have another question-the homeowner bought the house in 2004 for about $88k.  It appears she still owes $88k, which to me means she  took out a  second mtge.  She said she is willing to accept $38k...I was going to offer her $24k, in light of the situation.  Eppraisal-$86,940; Zillow-$53,237.  Because of what another invetor suggested, just make an offer of $20k-see if she accepts.

Please advise

Thank you!

Debra Grumbach · Answer

addressing what I believe is your question regarding my suggestion to work out a "cash for keys" deal with the tenant, no, I would not put it in writing. And yes, you need to inspect the interior prior to making an offer or you must assume that the entire unit needs to be gutted. Seriously, I never get owners who allow their tenants to push them around to the point where they cannot access the unit. Geesh. The only other answer is a forcible eviction and that can be time consuming and expensive depending on your state.

Tiese C. · Answer

@Will Barnard @Debra Grumbach--thank you, both, for the suggestions.  Just so I am clear & understand... speak to the tenant, first & try to offer "cash for keys".  If the tenant accepts, do I do some kind of contract with the tenant?  Then, let the homeowner know what has  happened afterwards?  Do I, also, ask the tenant permission to inspect the interior of the property?  Take pictures?  Because, as of now, the offer is going to be very low since I can't get inside.  I'm  still trying to get clarification on the balance of her mtge.

Will, what does this mean:

Then make your offer contract for that time period, thus arranging Odense occupancy at COE and without the need for cash for keys.

Thank you!

Will Barnard · Answer

Debra added a great point above. When you talk to the tenant, inform them that you will be the new owner soon and since they are on a month to month tenant arrangement, that you will need them to vacate. Let them know that you can give them (whatever the legal minimum is for your state) days to vacate. Then make your offer contract for that time period, thus arranging Odense occupancy at COE and without the need for cash for keys. That doesn't work, offer cash for keys. That does not work, tell them they will be evicted and make your offer accordinglly.

Debra Grumbach · Answer

If the landlord is okay with you talking with the tenant then go for it. If you are offering "cash for keys" I would say offer it before you go to contract on the house but make the tenant understand they don't get the cash until they and ALL their stuff is out and you have the keys in your hand. You could also tell them they have to vacate due to new ownership and that you will be renovating and they need to move and just leave it at that. No cash.Good luck.

What is a Gentleman's Agreement & can it be wholesaled?

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