Part 3: Selling a Tenant-Occupied Income Property: When Everything Goes Wrong
When Everything Goes Wrong — and the Deal Still Closes
If a transaction can’t survive real problems, it wasn’t built correctly in the first place.
Older income properties — especially tenant-occupied ones — rarely move from contract to close without friction. The key isn’t avoiding issues. It’s structuring the sale so problems don’t become leverage against the seller.
Let me give you some context.
This was a multi-unit, tenant-occupied property. It was already in escrow when things escalated.
The Leak
One week before Christmas, the downstairs tenant walked into his bathroom and noticed a large bubble forming in the ceiling. That’s never a cosmetic issue. It’s a leak.
A plumber was called out immediately and confirmed what we suspected: the upstairs toilet had been leaking for an extended period due to a prior improper repair. Once the ceiling was opened, mold was discovered. Given the age of the property, testing was required before remediation could even begin. Asbestos-containing material was identified in the flooring.
This is where many transactions stall.
Instead, professionals were mobilized quickly:
Plumber on site same day
Environmental testing and remediation companies out within three days — during Christmas week
Tenants’ rights fully respected and they were relocated to a hotel while remediation occurred
Asbestos abatement coordinated alongside mold remediation
Contractors scheduled to begin reconstruction the day after remediation was completed
All estimates were obtained.
All work was scheduled.
All contractors were coordinated.
The owner lives in Florida. He wasn’t managing vendors, fielding calls, or negotiating schedules. I handled every moving piece — from plumbers to environmental testing to rebuild.
The repairs were completed in approximately two weeks. In the context of environmental remediation, that’s extremely fast — especially during the holidays.
The Fire
As if that weren’t enough, prior to listing, a tenant’s guest discarded a cigarette on an exterior deck. The deck caught fire.
I met with the fire department on site. The deck was red-tagged. That triggered city involvement and code enforcement review.
Within five days:
A contractor was engaged
Engineering was addressed
The permitting process began
Reconstruction was underway
Again, this wasn’t delegated to the out-of-state owner. It was coordinated and executed locally.
Why the Deal Survived
At this point, many buyers would look for an exit. And many transactions would collapse.
This one didn’t.
Not because the problems were small — they weren’t.
Because everything else had already been structured correctly.
Before escrow:
Leases had been cleaned up
Financials were transparent
Inspections were completed
Tenants were informed and cooperative
Expectations were aligned
So when the unexpected happened, it didn’t create distrust. It created a logistics problem.
And logistics can be solved.
The Hidden Advantage Sellers Miss
Buyers don’t panic when they feel confident in the process.
When they believe:
Information has been transparent
Issues are being handled quickly
Professionals are in place
Communication is clear
They stay engaged.
They don’t immediately retrade.
They don’t walk at the first sign of complexity.
They give the transaction room to breathe.
That confidence isn’t built during crisis. It’s built before it.
The Takeaway
Tenant-occupied properties don’t need to be perfect.
They need to be predictable.
If you’re selling a rental property or a home with tenants, problems are not the real risk.
The real risk is having a transaction that isn’t structured to absorb them.
Because when things go sideways — and eventually something will — execution is what protects price and keeps the deal moving forward.
Click here to read Part 1: Selling a Tenant-Occupied Income Property: How Friction Kills Value (and How to Eliminate It)
Click here to read Part 2: Selling a Tenant-Occupied Income Property: How to De-Risk a Tenant-Occupied Sale Before It Hits the Market