You’ve had an investment property, but you’re ready to let it go. The only problem is, the house still has tenants. How do you go about selling your rental property while people are still living there?
Here’s what you need to know about how to sell a house with tenants.
Know the Law Regarding Selling with Tenants
Real estate laws vary from state to state, but you’re either going to have to ride out the terms of the lease or convince your tenant to not only vacate but also allow you to show the property while they’re still living in it.
If the lease you and your tenant signed includes an early termination clause, you can choose to vacate your tenants with proper written notice. Or, if the tenant has violated the lease or is faulty on rent, you can terminate the contract. But there is a more delicate approach.
Many landlords choose to list their property while renters are still in it, and they do so successfully.
Both you and your tenant have legal rights, and a lot hinges on your lease agreement. Whatever terms you and your tenant agreed upon in the lease have to be honored – or you must reach a compromise and re-write the terms of the contract.
If you’ve rented the home on a month-to-month basis, you may be required to give the occupants 30-60 days notice that you’re selling the property, and that they need to move. However, things may be more complicated on a longer-term lease.
You may have to work closely with and incentivize your tenant to work with you during the sales process.
Notify the tenant in writing as far in advance as you can. The more time they have to prepare, the more willing they may be to assist you in the sales process.
Ask the Tenant if They Want to Purchase the Property
Your first and easiest option is to sell your house to the occupant.
In the best-case scenario, your tenant will both want to and be financially prepared to buy your house.
This arrangement is the ultimate win/win where you don’t have to show the house or find a buyer, and your tenant doesn’t have to move.
If they’re not prepared to purchase when you’re ready to sell, perhaps you could consider a lease with an option to buy, or an owner-financed arrangement.
Buy-Out the Tenant
It’s not the most attractive option, but if your tenant is willing to move out early (or puts up resistance and needs more motivation!), you can offer to pay part or all of their moving expenses or buy-out their lease so they can afford to relocate.
Sell to an Investor or as a Primary Residence
You can opt to sell your house as a primary residence to traditional buyers. But you don’t have to stop there. There’s a broader audience you can reach – and one with substantial purchasing power.
You might find another investor, like you, who is interested in taking on a rental property. An investor might make the sale a winning situation for everyone involved.
Investors may be more than happy to inherit your tenant, provided that there’s a history of timely rent payments.
Showing the Property with Tenants
Even if investors are interested, they’re still going to need to view the property and will likely require appraisals and inspections, so you’re going to need your tenant to cooperate with you throughout the process.
Your goal when listing your rental property for sale is to have a healthy relationship with the tenant. It would help if you had the tenant’s cooperation throughout the sales process.
If possible, meet with your tenant in person to discuss the upcoming changes. If applicable, thank them for being good tenants and assure them you’ll ease the process as much as possible, including helping them find another place if you can.
For showings, the house has to be presentable. Some sellers have to go through a staging process to show their homes, but by showing the house that’s already occupied, decorated, and tidied, you can one-two-skip-a-few over the staging process. Your tenant may even be willing to go the extra mile and start packing their personal effects to depersonalize the space.
To inspire your tenant to keep their space company-ready, you may consider offering a few gifts. Consider a lower rent, paying for a cleaning company when you know you’ll be showing the house to potential buyers, or offering them a flat-rate compensation each time the house is shown.
You’ll also need to ask your tenant to leave the house during showings – and to make arrangements for any pets. Leaving the house can be a significant inconvenience to tenants, so try to schedule showings when it’s convenient for them, such as while they’re at work. If your tenant has pets, it may be helpful if you offer to pay for boarding during showings.
If you don’t have a good relationship with your tenant, or if they react adversely to your situation, you might find it easier to wait until the lease expires.
Your Real Estate Agent is Your Best Resource
Discuss your situation with your professional real estate agent. Your agent should have experience with investment properties and may have valuable information, tips, and tricks to help you ease the burden of evicting your tenants so that you can sell your rental property.
Both you and your tenant are in an awkward situation when you have to tell them they need to move. And to make matters worse, while they’re trying to figure out what their next move will be, they have to help you sell the house.
It’s best to talk with your tenant in person to inform them of your situation. Assure them that the lease will either be upheld, mutually revised, or bought-out. Make them feel as comfortable as possible. You want the tenant on your side.
Be clear with your tenant about what you need from them: you need them to keep the house in excellent condition for showings, to leave when you show the house, and, potentially, to vacate by a particular date.
Offer to ease the burden by lowering the rent, hiring a cleaning service, helping them find a new place, paying their moving costs, or give them the first opportunity to buy. If your occupant isn’t positioned to buy, you could try to sell to an investor who might be willing to keep the tenant.
The better the relationship you have with the occupants of your house for sale, the easier it will be to sell your home with tenants.
And most importantly, consult with your real estate agent who can guide you through the legal matters and offer ideas on how to simplify the process for you, the tenant, and the buyer.
Have Questions? Ask Lindsay!
Give Lindsay Rice a call today at 703-223-8676 to set up a time to discuss your current and future real estate goals in regard to buying or selling a home. We look forward to working with you to make your goals a reality.