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Some homes were meant to be rented – apartment buildings and multi-family homes for example. Having tenants in these types of properties is acceptable and even a positive asset when it is time to sell. However, the same is usually not true for single family homes. Most of the time single family homes are bought by people who would like to move into them as their residence, not rent them out. Selling these homes can be challenging.
If you are considering selling your single family home that is currently rented out you may want to keep a few things in mind:
Leases generally run with the land – not the owner. That means if you have a lease in place, the buyers of your property will be buying the tenants with the home. This will prevent anyone wanting to buy the home as their own residence from buying your property. Even if they do agree to buy and see out the existing lease, their lender may disagree as most financing products distinguish between an owner occupied home and an investment property. Selling a home with tenants in place greatly reduces your buyer pool and ultimately what those buyers are willing to pay.
Tenants, even those on a month to month lease, do not personally benefit in any way from showing the home they live in. 99% of the time tenants will make showings difficult or deny them altogether. Keeping the home in show shape also offers them no direct benefit, so don’t count on too much effort going into this. Tenants are inconvenienced by showings and having to move unexpectedly by having their home sold is simply not in their best interest.
Tenant occupied homes take longer to sell and sell for less, if at all.
If you wish to have your home sell quickly and for the most money – it is simply best to not have tenants present in the home. Timing your home sale after the tenants lease has ended and they have moved away is best.
If that is not possible and you must sell anyway:
- Negotiate a month to month lease with the tenants so the home can be vacated prior to closing should a buyer want to move into the home.
- Have an open conversation with your tenants about your intentions to sell and how this will affect them – before going on market. Set expectations for showings and for what condition the home should be in for showings.
- Unless you have the world’s nicest tenants, they will likely still not be truly motivated to help you sell. If that is the case – Incentivize! Reduced rent or other financial incentives will probably work best here to get the tenants to cooperate with your efforts to sell the home – consider it a cost of sale. It will most certainly be cheaper than your first price reduction.
- Give plenty of advance notice for showings. Yes – they likely have the legal responsibility to show the home with 24 hours written notice (depending on your lease), but once you must resort to forced showings, things have a tendency to go downhill. You can force them to show, but they may very well be present for the showing, or fail to keep the home in its best condition.
- Tenants that are truly uncooperative to a point of violating the terms of their lease are best dealt with by an attorney.
It’s always easier when they’re on your side. For the best results try to understand your tenants position when “their home” is being sold and work to get their cooperation in advance.