Many homeowners chose to rent their property over the past
several years as an alternative to selling at a reduced market value.
Now that the market is up, these "accidental landlords" might need
some guidelines on how to sell a tenant occupied home.
My best advice is 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.
1. Wait for the lease to expire - In California,
tenants are protected by law and so even if you are selling, you cannot make
them leave prior to the expiration of their lease. One reason you may
want to wait until the lease expires is that you may have a difficult or
disgruntled tenant who feels that the home is being sold out from under them.
The last thing you want to do is to make showing the home more difficult.
Sometimes in these situations, the tenant may leave the house messy or
speak negatively about it to potential buyers. With this scenario, it
could have a dramatic effect on your bottom line.
Of course, the downside to allowing a lease to expire and
then sell is that now you have a vacant home for an indeterminate amount of
time that is not producing any income. In the meanwhile, of course, the
mortgage payment and other expenses need to be paid. Many sellers are not
in a position to "carry" the property for any significant period of
time without the rent to offset their expenses
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.
It is important to remember that even though you own the
property, it is still the tenant's home. 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 a reasonable amount of 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.
If you treat your tenants with kindness and respect, they
will usually work with you.
Most tenants really don’t want to hold up your sale and
after the initial shock of hearing that the property is going up for sale, they
usually cooperate.
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.
In the end, the success of dealing with a tenant during a
sale is less about the message itself, but in how the message is delivered.
