Q: My sister owns a single family home in Queens Village with a tenant who stopped paying rent more than a year ago and is refusing to move. At this point, my sister wants to sell the house – she cannot afford to keep paying the mortgage while a family lives rent free there. But can she sell a house that is occupied by a tenant who is not paying? And for how much?
ON: Her sister can put her home up for sale with a non-paying tenant. However, a single family home occupied by a non-paying tenant is a difficult sale. It would likely take a while to find a buyer and it would inevitably require a deep discount.
"You're going to lose a considerable amount of money," said Bo Poulsen, a salesman for Brown Harris Stevens, estimating that a house in your sister's situation could cost 10 to 25 percent less than a comparable house that was and still is empty It takes months to sell.
In the state of New York, the pandemic eviction moratorium applies to most tenants until May 1, provided they fill out a hardship statement. Any prospective owner is likely to face a long and unsafe eviction process, making this home a risky investment. It will take time to find a buyer "who has a high pain threshold," said Poulsen.
If your sister decides to keep the house, she will have to take care of the tenant and the return rent – even a month-long process that comes with high legal fees. And if she hasn't started an eviction case, she'll be waiting in a long line.
Once the evictions resume, the pace "will hardly be a drop with so many cases already in the queue," said David Skaller, litigation attorney and partner at Belkin Burden Goldman law firm in Manhattan. A landlord who hasn't started the process is likely to "fall behind the eight ball so far that it won't be fun".
Your sister should reach out to her tenants again and try to work a deal – for everyone. A prospective landlord, especially one who was willing to make such a risky investment, will have an incentive to collect the outstanding rent. "Try to find a sensible solution that works for both sides," said Poulsen. "In general, it is cheaper to find this solution than to have the property on the market."
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