Source
r/RealEstate•
edikit

All but approved for rental, but house still in escrow. What should I be aware of before signing a lease? [CA]

Apologies if this is the wrong sub for rent-related questions. I'm not too sure where else to post for advice.

My boyfriend and I found a great condo, did a walk-through, got our application approved, and are one step away from getting into lease negotiations. My only concern is that the condo is still in escrow.

It's looking like everything should be finalized toward the end of April and the agent we've been talking to wants to set our move-in date for mid-May. I must give my current landlord 30 days notice, so I can either do that now and risk escrow falling through, or wait until everything is 100% finalized and have some overlap with my current rent and the new rent.

My biggest concern at this point is putting in our 30-day notice and having the whole thing fall through. We can handle a bit of overlapping rent, but it's extremely difficult to find decent rentals here, so if this place doesn't work out, we likely won't be able to find something else in that short of notice.

What would be our safest course of action here? Is this type of thing (buyer renting out the property before closing) fairly typical? Any red flags we should be on the lookout for?

Any advice/insight would be greatly appreciated!

Posted Apr 15, 2019, 4:45 AM UTC

06
Kryssa•

Would definitely not sign a lease until the deal is closed. Homes fall out of escrow all the time and you don't even have the full picture.

3
seattle-diarrhea-dadRE investor•

Bingo. This. This. So much this.

1
aardyMortgage Broker, SF Bay Area•

What would be our safest course of action here?

Rent a property from someone who owns it...? 1 in 3 purchase escrows involving a mortgage falls out, eggs are being counted before they hatch.

2
edikitOP•

The way I see it, these are our options/risks so far:

  1. Put in our 30-day notice now, wait until escrow closes to sign new lease, move in mid-May, no overlap in rent, but risk escrow falling through and still having to vacate current rental

  2. Wait until escrow closes to sign new lease and put in our 30-day notice, move in mid-May, but have several weeks overlap in rent

  3. Negotiate with agent to push back move-in date given house is still in escrow, risk not moving forward if owner is unwilling to budge on date

I kind of feel like this entire process is an exercise in counting eggs before they hatch. Even with buying/selling a home, the seller is having to make moves on the home they wish to purchase before their current home has even been handed over.

1
BuildingAFinancial•

It's not typical for a buyer to sign a lease while the property is still in escrow, in my experience. This could be a scam. I would wait for the property to close escrow before signing a lease and giving notice on your old place. In addition, I'd make sure the owner of the property and the lessor are the same.

2
edikitOP•

That fear was definitely in the back of my mind, but we turned in our application in person to a RE/MAX storefront and all of the names check out, and the broker we met to do the walk-through is licensed.

From what I've gathered, the broker will also be acting as the owner's property manager on the rental. I haven't had any contact with the to-be owner, so I'm speculating that they just want someone renting as soon as escrow closes to cover their mortgage. This area is big on investment properties, being right by the beach, so I wouldn't be surprised if the owner doesn't even live here. But now that you mention it, I'll be sure to get clarification on that.

In any event, I think you're right in that our best bet would be to wait on escrow before taking another step, including notifying our current landlord. It might ultimately mean a bit of overlap in rent, but I'd much rather deal with that than find ourselves without somewhere to live.

Really appreciate the insight!

1