Tips for Selling a Home with Tenant
Tips For Selling Home With Tenant
To sell home with tenants is a complicated process. Most homeowners worry about selling home with tenant that are tenants occupied. If you are selling a single-family home with tenants it may be more complicated. Selling home with tenants is all about cooperation from those folks who occupy your home. It may be extremely difficult to sell home with tenant if there is an uncooperative tenant involved. Selling with tenants can be a challenge, and a tenant can make or break your sale. You’ll have to plan well in advance, communicate openly with your tenant, and make some compromises in order for your sale to be a success.
Follow these simple tips to selling home with tenant.
When you decide to sell your home with tenant, there are two courses of action you can take as a landlord:
Course-1: Waiting for the lease to expire before selling.
Course-2: Selling while your tenants are still living in the home.
Tip # 1: Wait for the Lease to Expire Before Selling.
If you’re able to wait for your tenants to move out, you’ll be able to clean, do any cosmetic repair, and just generally spruce up the home before listing, which may help you snag a higher sale price. This allows more time for updates. In a hot real estate market, the home could sell quicker than you expect, and depending on the terms of the lease and regulations in your state, you may have trouble getting your tenants out in time.
Tip # 2: Offer Tenant a Chance to Buy.
Approach your tenant about purchase option directly. If your tenant really loves the property, they might be interested in buying the home. It’s fine to approach your tenant about this option directly, but if they’re interested in purchasing, you’ll definitely want to work with a real estate agent.
Tip # 3: Give Tenants Various Option to Purchase.
A lease-to-own with a one-time, non-refundable option fee that allows tenants the right to purchase the home within the year, at a set price. In the meantime, they keep paying rent.
A lease-to-own agreement, that is structured so a portion of the rent goes toward a down payment.
A seller-finance agreement, you, as the property owner, serve as the lender, instead of a bank. The tenant agrees to make payments to you over a period of a few years, often with one balloon payment. The biggest benefit for the seller is the money you’ll make in interest on the debt. In order to take advantage of this type of sale, you’ll need to own the home free and clear, without a mortgage.
Tip # 4: Give Tenant the First Refusal.
Give tenant the right of first refusal. By giving them the first refusal, selling a house with tenants might be the fastest way one has ever sold a property! Even if the tenants don’t buy the property, they will feel very appreciated by having given that opportunity!
Tip # 5: Tenant Occupied Home Attract Investors!
When a home is furnished, buyers often have an easier time picturing themselves living there. If your tenant has taken good care of the home and decorated it nicely, it may be more desirable to potential buyers. Having tenants already living in the property is a big selling point for anyone who might be looking to buy the home as an investment property. You’ll be saving them the hassle of finding a tenant!
Tip # 6: Unoccupied by Tenants! Accept the Best Offer.
If the home is unoccupied when you list it, you can accept the best offer without having to worry about timing. This can alleviate timing issues with closing.
Tip # 7: Offer Incentive! Offer Tenant Lower Rent for a Few Months or Moving Cost.
In order to persuade your tenants to cooperate with your sell, consider offering them lower rent for a few months in exchange for an agreement to show a clean and well-kept home. Other incentives may include offering a flexible move-out date or reimbursing moving costs. This really works.
Tip # 8: Review Lease Agreement to Determine Legal Options.
The first step you should take is reviewing the lease agreement you have with your tenant. You should also look up laws in your state regarding how much notice to vacate you are required to give. Your real estate agent can be a great resource for local legal requirements, as well as offer tips for a successful sale with tenants in the home. The actions you can take and when mostly depend on what type of lease agreement you have with your tenants.
Tip # 9: Notice to Vacate Property! Review Lease Agreement to Determine Legal Options.
Send a letter to your tenants, letting them know the date their lease agreement will be canceled and the date they’ll need to move out. In most states, you need to give them either 30- or 60-days’ notice, but make sure to check your local laws. Whether you can show the property while they’re still living depends on your existing lease agreement.
Tip # 10: Go by The Early Termination Clause of The Lease.
If the lease agreement includes an early termination clause, you may vacate your tenants with proper notice. If not, you’ll just have to wait until their lease is up. If your tenant has failed to pay rent or violated any lease terms, you may be able to terminate the lease early. Take advantage.
Tip # 11: Communicate with The Tenant. Be Respectful and Informative.
A landlord isn’t prohibited from selling his property while there are tenants with a lease agreement occupying the property. This lease tends to precede the sale of property, which means that the tenant is perfectly entitled to remain at the property until the end of the lease period.
Practically, even though tenants are entitled to stay on, one will actually see quite a few tenants looking for another accommodation, due to the uncertainty created by an incoming landlord and/or unfavorable terms at the next lease negotiation! So, it becomes very important for the landlord to properly communicate with the tenants about his near-term intentions with the property. But meeting in person is best, so ask your tenant to meet you for a cup of coffee. Make sure to allow enough time to address all of their questions.
Tip # 12: Make Showing Times Easy for the Tenant.
Let the listing agent know that the tenant needs at least 24 hours’ notice for showings (or whatever time is specified in the lease for entry). Let the agent know if there are times that the property cannot be shown due to the tenant’s schedule. The listing agent will make sure that any buyers and other agents wanting to view the property will abide by your timing requests. You can always contact the tenant with a special request to show the property on shorter notice, but unless you reach a new agreement with the tenant, the notice required for entry is governed by the lease.
Tip # 13: Request the Tenant to Depart the Property During Showings.
No buyer, investor or otherwise, likes to be followed around by a resident especially one who may be grumpy about the impending move. The buyer should be able to freely view the property. Offer the tenant a gift card to a nearby coffee shop to use while the property is being shown.
Tip # 14: Seller May Take Some Responsibility for Keeping the Property in Show-worthy Condition.
Make keeping the property in good condition easy for the tenant. Offer to hire a cleaning or yard service for the time when the property is on the market. Since a tenant doesn’t have a stake in the sale of the property (and may even be in the process of moving out), it’s important that you, the seller, take some responsibility for keeping the property in show-worthy condition.
Other Tips For Selling Home With Tenant
Help the Tenant Find a New Residence.
If you own other investment properties, alert the tenant to any appropriate openings. If you are not an investor, you could suggest sources of local listings or let the tenant know that you will ask your friends whether anyone knows of available properties.
Tenant May Get Caught up with Rent.
Some landlords are more lenient than others in letting tenants get behind in rent. If the tenant is staying on and is behind in rent, it’s time to take action. A delinquent tenant is not a good selling point. One option may be to forgive the delinquency in exchange for the tenant moving out. Court action and eviction is also an option if the tenant is unable to pay rent.
Allowed Tenants to Cancel the Lease Prematurely.
If the property will go onto the market for sale, allow tenants to cancel the lease agreement. The tenant might even be allowed to cancel the lease prematurely and find a new accommodation once the decision has been made that the property will go onto the market! If those are the terms (with mutual consent), then no penalties can be placed upon the tenant if he chooses to break the lease agreement.
The Tenant Will Not be Able to Just walk Away from The Lease Agreement.
If nothing is specifically noted in the lease agreement regarding the sale of the property, the tenant will not be able to just walk away from the lease agreement. At least, not without being faced with hefty penalties!
The New Landlord Needs to Respect the Lease Agreement.
As much as the new landlord needs to respect the terms of the established lease agreement, so will the tenant need to respect the agreed upon contract. Especially if the new landlord bought the property with a buy-to-let investment goal in mind!
Challenges While Selling Home With Tenant Occupied
Big Uncertainties Remain with Tenants.
Will the tenants be helpful and/or flexible when it comes to showing times for the real estate agent? How will the property look like during showings? How will the tenants behave during the sale of the property?
Disgruntled Tenants Can Make Showings Difficult.
You’ve just told your tenant they have to move out. And now you expect them to keep the home showing-level clean and accommodate showings and open houses? This can be a difficult pill to swallow, and unpredictable tenants can have a big impact on how the house shows.
Await the End of The Lease.
The huge uncertainty of not knowing whether the tenants will be helpful in getting the property sold, and hereby risking wasting a lot of time (and money lost as the property becomes stale by sitting on the market for weeks and months on end!), result in a lot of landlords preferring to rather wait until the end of the lease agreement before placing the property on the market.
Difficult to Get Access to the Property.
Can you imagine the damage these uncooperative tenants could do? Why bring through interested buyers if you don’t know whether you’ll actually get access to the property? Not only that, but it will be tough to get agents over the floor again as they know the clear and present danger at that property!
Waiting it out until the lease expires all of a sudden doesn’t seem to be such a bad idea after all, does it! Unless of course, they’re susceptible to the attractive incentives the landlord will offer!
Dealing with Cooperative Tenants.
According to most real estate agents, selling a house with tenants is asking for trouble, will get messy and rarely ends on a good note. Nonetheless, the reality of the situation is that not every landlord has the luxury to wait for months until the lease agreement expires before selling their property. Even then, it might easily take as long before the house is sold, which means loss of rental income for the landlord.
In the event that the tenants have offered their cooperation in getting the property sold, it’s important to lay down some ground rules. Personally, I refer to these opportunities as the real estate agent’s chance to excel at managing expectations!
Selling Home With Tenant – Dealing with Non-cooperative Tenants.
Selling a house with tenants, uncooperative ones that is, will be viewed by most real estate agents as mission impossible! These are the people who actually live in the house, day-in day-out, who are very familiar with the property, know every problem or shortfall the house has, and who are very familiar with the neighborhood!
Incentivize the Tenant. Attractive Incentives the Landlord Will Offer!
The cooperative tenants will very likely see some incentive reward heading their way for the help given during the sale process. The uncooperative tenants might change their bad attitude once they find out how much they’re about to make for being normal. If simple communication isn’t cutting it with the uncooperative tenants, a great incentive will do the job!
Tit-for-tat Exchange.
The tenant needs to clean up his mess on a daily basis (ideally 1st thing in the morning), and make sure to be available for showings! The landlord will then work on a big discount on the rent (e.g. rent amount cut by 50% per month), or other great incentives, such as helping to pay for the outgoing tenants’ moving expenses!
Tenant Privacy is Important. Clear Communication is The Key!
The tenants’ privacy is important. While on the other, it’s important for them to understand the need to be accommodating for showings! Once the landlord has established that his tenant will be cooperating with the home selling process, clear communication will be key!
What will be the condition of the property be like during the selling process?
- How long in advance will the agent give the tenants notice for showings? How long is too long or how short is too short?
- Will there be open houses?
- Will the tenants be getting feedback of what’s happening with the showings?
- In the end, will there be some sort of reward for the tenants in exchange for their assistance?
Selling Home with Tenant – Wrap Up:
Selling a home with tenants is a complicated issue. Consult with a legal expert in this critical issue. When selling home with tenant, it can be a potential minefield! The landlord needs to make sure to have verified his tenancy facts, his lease agreement and run his actions by his legal counsel, all in order to avoid getting stuck in an ugly legal fight with his tenants! After all, it’s clear what’s in it for the landlord if the property sale goes thru, but what’s in it for the tenants? Are you planning to sell your home in LA, OC, RC and SB Are? Contact Us For a Free Consultation.