After 2008, many would-be home sellers couldn’t get the price they needed to sell. Or worse, their homes were underwater. And so, some homeowners were forced to become “accidental landlords.”
This year, as the real estate market continues to rebound in many parts of the country, millions of homeowners will consider getting back in the market. But this time, they’re trying to sell a tenant-occupied home.
A tenant can make or break your sale. You have to plan well in advance and communicate openly with your tenant to have a successful sale. In some cases, you may even have to postpone it. If you’re the owner of a tenant-occupied property that you want to sell, you’ve essentially got two options. Here’s what you need to know about each.
Option 1: Wait for the lease to expire
Most real estate agents would argue that a seller should wait for the rental agreement to expire. Tenants can sometimes be a bit of a wild card in the high-stakes real estate game, so some agents feel it’s best to proceed after the tenant leaves. After that, make some cosmetic fixes to clean up the home and sell it vacant.
This may be especially important if you have a difficult tenant or one who is unhappy that their home is “being sold out from under them.” The last thing you want, is to make showing the home more difficult — and a disgruntled tenant could easily do that by mucking up paint or leaving his place a mess. The result is that your property looks less appealing to potential buyers, which can have a dramatic effect on your bottom line.
On the other hand, selling a vacant rental unit isn’t always ideal for the seller’s finances. It can take months from the time the home goes on the market until it’s sold; that’s time during which the landlord receives no rent. This can be especially trying for sellers whose homes have been a long-term financial burden.
Option 2: Sell while the tenant is still there
It can be beneficial to keep your tenants in your home during the marketing and sales process, provided you have a good relationship with them. Homes show better with furniture, giving buyers a better feeling for what it would be like to live there.
Ready to sell but have a tenant in place? Do your best to work with them. Most tenants, upon hearing that the landlord would like to sell, immediately start looking for a new place to live. They’d rather just move on and not have to deal with keeping their home clean all the time, showings and phone calls from agents.
If your home is in a desirable neighborhood, you plan to price it right, and you believe it could sell quickly, use your tenant to your advantage. Lower their rent for a month or two leading up to the showing and/or selling. If you can get them to stay and cooperate through open houses and showings, tell them that you’ll guarantee them enough time to find another place and move. Also, if they’re helping you to get the home sold quickly, offer to help pay their moving costs.
Give thought to the message, delivery
Most tenants really don’t want to hold up your sale. Others will protest, and those are the ones who make the headlines or get talked about in real estate war stories.
If you have difficult tenants and suspect they won’t be cooperative, simply let the lease run out. Or find a way to legally take the home back and sell it vacant. But if you have a good relationship with your tenant, try to work with them. No tenant wants to be surprised with little (or no) notice that they must vacate.
Ultimately, the success of dealing with a tenant during a sale is less about the message itself, but in how the message is delivered.