I Need some Home Ownership/Real Estate Advice

Cmike2780

Hey friends. My fiancé and I are about to buy our first home and I need some advice. We're currently under contract, but facing a few problems.

Quick Summary:
-The house we're purchasing is a single family, however the current owner has a tenant living in part of the house (own entrance, kitchen etc...).

-We intend to remove the 2nd kitchen & tenant entrance when we move in and bring it back to it's original configuration. Just minor work really.

-It doesn't have a legal rental permit, so basically the space is an illegal rental.

-The bank won't approve our loan if it's a 2-family residence. They'll remove the stove for the appraisal.

-Our mortgage rate lock is good until 4/28/14, so we were hoping to close by then.

-We find out after the offer, but before contract that the tenant supposedly signed a rental agreement until October 1, 2014. Our realtor told us he would agree move out by May 1st, May 15th the latest however, so we signed thinking they could close around May 1st.

-Contract states we can close "on or around May 1st"

-We expect the home to be vacant when we move in.

-Found out today that the tenant can't move out until the end of May.


The problem basically comes down to this. We don't want a tenant there when we move in. At first, our realtor told us the tenant could leave any time....that there was no rental agreement since it wasn't a legal rental. So we said okay and made our offer. We agreed on a price, locked in our rate and I set out to have a home inspection done. Then our realtor tells us the tenant can't move out until May 1st...May 15th the latest. We said okay, sign the contract which states we will close "on or around May 1st." Maybe we're naïve, but now we're finding out that "on or around May 1st" means it could be as late as June 1st?! Now they tell us that the tenant can't move out until the end of May. WTF! (I f*cking hate our realtor right about now! She's lied or misinformed us several times now, but we have no choice but to stay with her....her husband is the owner's agent). Which means we either keep the tenant (living in our illegal apartment) or we eat the cost to extend our mortgage rate lock and possibly jeopardize our loan. If for some reason the whole thing falls through, it also makes our loan officer look bad. Something we don't want since he's helped our family in the past and have a good relationship with. We took it on good faith that what our realtor was saying was the whole truth, big mistake. Now she's trying to put it all on us.

I guess my question is, what would you guys do? We really love this house and the appraisal already has us $20k ahead in equity. We already put down $10k for the down payment along with inspection fees, attorney fees etc....

If we purchase the property, do we have to honor the rental agreement? Is the rental agreement binding? ...even though it's a an illegal rental space?

Should we just close, let the tenant stay and collect rent? The reason he can't leave is because he's a professor at a local university and can't move until classes end. We want the house to ourselves though and don't need the rent or the liability of an illegal rental.

Any advice would be greatly appreciated. Thanks in advance.

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