Tips For Selling a Home With Tenants
Do you need to sell a house with tenants? Selling a house with tenants isn’t always easy.
Tenants are a definite wild card when it comes to selling a home. Many ask if you can sell a house with tenants in it.
There are plenty of horror stories about angry or disgruntled tenants making it impossible to sell a home.
On the contrary, a tenant can be a valuable ally in the sales process if he or she is cooperative and motivated to help you sell.
When selling rented property, it is up to you to gauge your landlord/tenant relationship and to decide how to sell your home – while the tenant is residing there or after they are gone.
Keep in mind that what a tenant tells you they will agree to do while you are trying to sell your home and what they do could be two vastly different things.
Most real estate agents will tell you that having an uncooperative tenant will make selling your home next to impossible.
Knowing how to sell a house with a tenant is a critical aspect of getting top dollar for your home!
Before hiring a real estate agent to sell your property, it goes without saying that you should ask the tenant first if they have any interest in purchasing it.
It could influence your decision on renting or selling.
You are going to need your tenant’s utmost cooperation in this situation so you best respect them by explaining completely the situation you are in and why you want to sell.
Giving them first dibs shows you have some compassion for their housing needs as well.
Options for Selling a House With Tenants
When You Have Tenancy at Will Give 30 Days Notice
If you have a tenant occupying your property under a tenancy at-will agreement, selling rented property becomes far easier. Your rental agreement will state it’s necessary to give your tenants the required 30 days notice.
This type of tenancy agreement is like having a month-to-month lease.
Immediately after they vacate the property, you can go full steam ahead with finding a new buyer and getting it sold.
You’ll need to make sure you give the current tenant proper notice in writing for them to vacate. If you have a long-term lease, the advice on how to sell a property with tenants will be a bit different.
Wait For The Lease to Expire When Selling Rented Property
If the lease term is going to be expiring soon, it may be in your best interest to wait.
Tenants can wreak havoc on a sale. Some tenants can become angry when they discover that you are selling the home they live in. Other tenants are just not nice people, to begin with. Still, others are just dirty and will not keep the home in a good state for showings.
If you know you have a slob living in your place, you can count on this not changing when the for-sale sign goes up. Once a slob, always a slob. If your long-term plan is to sell your home, it makes sense to be extra careful when initially choosing a tenant.
Let Prospective Tenants Know Your Long Term Goal is The Sale of The Property
If your long-term plan is to sell your home, it makes sense to be extra careful when initially choosing a tenant. Let the renters know upfront that your long-term goal is to sell your home and get the tenant’s reaction.
If you don’t get positive vibes, you may be better off waiting for a tenant who understands your goals.
There are a lot of ways that tenants can throw a wrench in your sale, ultimately costing you money and causing unnecessary stress in an already stressful process.
If you have this type of tenant, often the easiest course of action is to wait until the lease expires and let the tenant leave.
Once they are out of the house, you can clean it up and make any necessary renovations to make the home appealing to buyers. Then you and your agent can list the house and sell it like you would any other home.
Don’t Try to Sell a Home With a Bad Tenant
If there is any doubt whatsoever that this is the type of tenant you have renting your place do not make the mistake of trying to sell your home while they are there! Your chances of success are very slim.
When you are selling a home, the property can become stigmatized very quickly with real estate agents if it is difficult to show, intentionally left in complete disarray, or the tenants are hanging around during showings.
One of the most important variables in getting top dollar for a property is the ease of access. If a home is impossible to show, the days on the market are going to grow.
Days on the market are a seller’s enemy in real estate sales. Historically the longer a home is on the market, the larger the spread between the asking price and the eventual sale price.
Sale of The Property With Tenants: Single-Family vs. Multi-Family
Selling a home with tenants can be very different when comparing a single-family vs. a multi-family property. When you are selling a multi-family home, the rules of the game on how to sell a home with tenants are different.
Given the fact that two to four-family homes often times are investment properties, it is possible the buyer for the property could be an investor who would love for the tenants to stay.
Real Estate investors, in particular, may want the existing tenants to remain. A new landlord could be thrilled they already have a rental home where a tenant’s lease is in force.
If the real estate market is soft and finding tenants is hard this would certainly be the case. Tenants in good standing with a positive cash flow could be a godsend.
On the other hand, if it’s a seller’s market and the rental income being generated is under the market, it would be in the best interest of the new landlord to raise rents. They may want a new tenant if the existing tenants are resistant to rent increases.
Sometimes a real estate investor may prefer having a month-to-month tenant rather than being locked into a long-term tenant.
Tenants Can Have The Motivation to Be Cooperative
When selling a multi-family home you want the existing tenants to keep it in good condition. If they would like to stay when the new property owner takes over, they’ll have an incentive to make the property show well.
If the home looks disgusting and not well cared for, you invite a buyer to make a lowball offer. Don’t put yourself in this position if you don’t have to. Discuss this aspect with the tenant and impress on them how vital the showing conditions are for the sale.
If the tenant wants to remain in the home, they will need to show to the prospective new owner they are worthwhile tenants to keep.
Have an Early Termination Clause in Your Rental Agreement
When you own a rental house it may be beneficial to have an early termination clause. An early termination clause gives you the legal right with written notice to terminate a lease for a specific reason.
So before the end of the lease, you would notify the tenant of your intention to sell. The must be a valid reason in order to use this clause. It would be stated in the lease upfront that would be the reason for use of the clause.
If the sale of your rental property is a strong possibility in the near future having this could be a big deal. Here are some examples.
Work With The Tenant Selling Rented Property
Working with the tenant when selling a rented property might be your only option.
Unfortunately, not every homeowner has the luxury to wait until the tenant leaves before they sell the home.
You may be one of those who were forced to rent the home when the real estate market went bad.
Some folks might not have the finances to cover the mortgage while the home remains empty.
Considering that it can take several months to sell a house, you could have the perfect reason to sell while the tenant is still paying rent.
If you are lucky, you have a tenant that is actually friendly and helpful. This can be a real blessing when it comes time to show the house.
A good tenant will keep the place tidy and looking good so potential buyers will see what the house looks like with furniture in it – a plus for many buyers.
The tenant may be perfectly amicable to opening up the house for showings and he or she may be eager to move on from the home anyway.
Give Incentives When Selling a House With Tenants
Even if your tenant is not ideal, you can help motivate them to assist in the selling process. Some owners will offer to lower the rent for a few months to encourage the tenant to be helpful.
Doing so is one of the best tips for selling a house with tenants.
Money is one of the greatest motivators for cooperation.
Others will offer to help cover the moving expenses for the tenant or will guarantee to the tenant that he or she will be given extra time to find their next residence before the house is sold. A relocation allowance can be a strong motivator.
A good rule of thumb when you have an occupant who has a tenancy at will agreement is to extend the typical 30 days’ notice to an additional month.
A 60-day notice can be very helpful for a tenant in finding a new place to live. It helps give them enough time, especially when a rental unit is hard to come by.
You can do any or all of these things when selling a rented property to make the tenant eager to assist you in the sale.
Don’t Assume You Have Ideal Tenants
How you choose to deal with your tenant is something only you can decide. Although there are certain problem tenants out there that are only interested in being difficult, some are not actually this way.
Many will be more than happy to work with you, especially if you give them something in return. And if they aren’t, you can always wait until the lease expires to try and sell the house.
I remember a few years ago I was asked by a homeowner who was selling a home in Milford Massachusetts to come and evaluate his property.
The home had tenants and he thought it would be a piece of cake to sell his property because he thought the tenants would be angels. I explained to him that in my experience this was rarely the case and most of the time tenants make selling a home very difficult.
He wanted to use my services and hired me to sell the home with the tenants in place.
Almost immediately, the tenant would not allow people to see the home. They consistently said no to most of the showings, creating a challenging situation. Of the showings they did allow, the feedback repeatedly said the same thing – the home shows horribly.
Unfortunately, sometimes a seller needs a reality slap before they will believe how challenging it can be.
Know The Tenancy Rules When Selling Rented Property
Before deciding to sell a house with tenants make sure you understand the state laws. The tenant’s lease will dictate much of what needs to happen.
Laws can vary considerably from one area to another and it is important to know what rights you have and what rights your tenant has according to local laws.
Your tenants’ rights must be given consideration or you could find yourself in hot water.
It may be a good idea to consult a real estate attorney if you are unsure. Professional guidance can save you a lot of headaches later on.
In certain areas, it is possible for tenants to hold up a home sale for a considerable amount of time – up to a year in some cases.
Tenancy Laws Often Favor Renters
In several states, including Massachusetts, housing laws are set up to favor tenants and not owners.
Even if a tenant has clearly violated the terms of a lease or tenancy at will and remains in a house after the agreement expires, the onus will be on the seller to go to court to have them removed.
The eviction process can take months to get put before a judge. Tenants may have the right to refuse the sale in some instances.
These are things you really should know about before you go and try to sell the home with someone in it. Tenancy laws are something you should be well versed in.
Many sellers don’t know just how much tenants are favored when it comes to housing laws. Renters can be in the wrong, but they get the benefit of the doubt according to the laws in many states.
Establish a Rental Game Plan With Your Property
If you can convince your tenant to work with you while selling the home, you should lay down the ground rules for the arrangement. Make it clear what you will be giving the tenant and make it clear what you need in return.
A reduction in rent is a great incentive, but the tenant needs to know that this means you need the beds to be made and the dishes to be done before anyone views the home.
A good real estate agent is going to be concerned with the cooperation level from the tenant.
For example, when an agent calls to schedule the showing, will the tenant say yes in most circumstances?
While it is not unreasonable for a tenant to be granted advance notice on showings, how much is too much?
The easier it is to access a home, even on short notice, the better. Even in a traditional sale where there are no tenants involved most professional Realtors will counsel their clients on making the home as accessible as possible.
The more restrictions you place on any sale, the harder it is going to be to sell.
The longest notice that should be granted to a tenant is 24 hours. Anything longer than a days’ notice will make it extremely hard to sell a home.
It would help if you also stressed to the tenant that a Realtor will accompany any buyer who wants to view the home and that all valuables and any embarrassing items should be kept out of sight while you are showing the house.
Use Open Houses The First Weekend
While an open house is usually a complete waste of time for selling a home, with tenants they can be beneficial.
To make it easier on a tenant, one of the things you could do to ease the burden of showings is schedule an open house the first weekend the home is on the market and not let any showings take place until then.
There are many pros and cons of an open house with the drawbacks far outweighing the positives for a seller but having one day for an influx of showings helps out the tenant quite a bit. If you are fortunate, you will get an offer from someone who visits.
Clear rules and rewards are the best way to get what you need out of your tenant during the home sale. With a little negotiation and a reasonable tenant, selling the home will go much easier.
Tenants Can Be Removed When They Violate The Lease
When trying to sell a house with tenants, there are some ways they can be legally removed from a property. If they violate the terms of the lease, it will be grounds for the lease agreement to be terminated. Some of the common reasons are as follows:
- They are not paying their rent.
- The tenant was subleasing or was renting a room in violation of the contract.
- The tenants are doing illegal activities in the house.
- They are creating loud disturbances upsetting the neighbors.
- There was falsified information on their rental application.
- They have violated a no pet or non-smoking clause.
Final Thoughts on Selling The House With Tenants
Hopefully, all of this advice to sell a house with tenants have been eye-opening! Selling a property is a lot of work whether it is tenanted or not. Selling a home with tenants is certainly more challenging and should be thought through in advance.
Work with your real estate agent carefully on how to best go about selling with any tenants.
Other Helpful Home Selling/Tenancy Articles Worth Reading
- How to sell a rental home to the tenant – get some additional excellent advice on selling a house with tenants. See what it takes to sell a rented property.
- How to sell a house fast – do you need to sell a home quickly? Discover some excellent tips for making it happen via Maximum Real Estate Exposure.
- Massachusetts tenancy laws – if you are selling a home with tenants in Massachusetts, make sure you understand the tenancy laws. Selling a rented property can be different from one state to the next.
Use all of these tips on how to sell a home with tenants in order to make the best decision for your individual circumstances. Understanding the level of cooperation, you will receive from your tenant is critical. Best of luck with the sale!
About the author: The above Real Estate information on selling a house with tenants was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 35+ Years.
Are you thinking of selling your home? I have a passion for Real Estate and love to share my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
This is a great article. Tenants can be a big hurdle to overcome sometimes when selling a home. We once had a tenant who turned out to be an agent for another real estate company. She removed our lockbox without our permission and would not cooperate for showings. She did everything you can think of in order to make the sale go bumpier than it should. Having tenants who are willing to work with you can make everything for everyone go more smoothly.
Heather I am sure that is an experience that most agents can understand all too well. I know I have had a couple of experiences like this in my twenty seven years of selling real estate!
I think simply knowing the rules and rights of both parties can work wonders. It’s when one thinks they know or doesn’t know that it can get ugly. If both parties are well informed it can go very smoothly. The problem is that doesn’t always happen! But you’re right, it is a sticky situation that many investors don’t like to deal with.
A Realtor should always keep in mind that tenants are prospective clients. They would be wise to show respect by being sensitive to the tenants’ situation, as well. Some Realtors turn tenants against them unnecessarily by being rude and disrespectful.
Agreed Virginia. All parties in any real estate transaction should get respect and certainly a tenant who is paying good money to live in a home.
What I have found over the years is some tenants do not want the place they are renting to sell and will make a real estate agents job ten times tougher. I am sure this where some of the problems with agents have occurred.