Though many property owners choose to wait until the lease has expired to sell their rental home, others cannot afford to have their house vacant for a few months during the transition. Selling rental property with tenants in place can be tricky. Keeping a home in show-ready condition can be difficult for sellers themselves, but when you are relying on your tenant to do this along with accommodating showings, it can place a burden and create unpleasant feelings. The last thing you want is an angry tenant meeting potential buyers. Careful planning and mutual understanding in advance is critical. A happy tenant can be your biggest ally in the sales process.
Here are some tips for selling a home with tenants.
1. Check your local tenant-landlord rules.
The first thing that you need to do before you begin this process is check your local tenant-landlord rules, which vary from state to state. This will help you find out what you can and cannot do when it comes to selling a house with tenants in your area. You might also consider consulting with or hiring a licensed realtor who has experience with these types of sales.
2. Then, before you do anything else, meet with your tenants. If possible, meet someplace for coffee or dinner and really talk. Always consider the tenant’s point of view when you are discussing your intentions with them. It is important to show that you understand their situation. Now is not the time to make demands. Explain your situation and reasons for selling and listen to how this will affect them and their family.
Speak clearly about how this will impact them and their tenancy.
• Is there a lease and when does it expire?
• Do you plan to ask them to move early?
• Are they interested in purchasing the home?
• Will you sell the home with the lease intact?
Remember that you are disrupting their lives, regardless of how cooperative they are planning to be. You are asking them to keep their home in perfect condition and allow strangers to traipse through on short notice and at various times of the day and evening. Working together to create a plan for this can give them peace of mind and empower them to be a part of the process, instead of its victim.
3. Set up protocol for how and when the home will be shown.
Communicate protocol early for how and when the home will be shown to prospective buyers. Some tenants may be hostile, especially if they do not want to move. This can make the process a lot more difficult, especially when it comes to showing the home. Work with the tenant to create a schedule and establish clearly defined protocol to make the process go more smoothly.
4. Provide incentive to get tenants to cooperate.
Make sure that the home is clean and unoccupied when you are showing the property to prospective buyers. This can get complicated when the home is occupied by tenants. Providing some sort of incentive will help ensure that your tenants are cooperative during this process. You might offer a monetary compensation for every time that the house is shown or perhaps 50% off the tenant’s monthly rent.
5. Make the process as easy for the tenant as possible.
Remember, for the tenant, the property is their home and not a commodity. You are not only telling them that they must move, but you are also asking them to keep the home tidy and vacate it when there is a showing or open house. Show your appreciation for the tenant’s cooperation and try to make the transition as smooth as possible. For instance, you might rent the tenants a hotel on the weekend of an open house or offer them a gift certificate for dinner during times when the home will be shown. You might also consider helping them find a rental agent to make the move easier on them.
Elliott’s Story of Selling Rental Property
Elliott contacted us at the end of March after seeing an Express Homebuyers TV commercial. He wanted to sell his rental property with tenants on 4th Street NW in the Petworth neighborhood of Washington, DC. The 4-bedroom, 2-bath property was already listed at the time and his asking price was higher than what we would be able to pay him for it, so the conversation didn’t go any further.
Near the end of the summer, Elliott contacted us again. His rental property with tenants hadn’t sold yet. Although he had a ratified offer, the buyer was never able to complete the deal. He was frustrated with how to sell his rental property with tenants and eager to sell to someone directly, if he could get the right price. Otherwise he would list the property again. We talked with him throughout the week and set an appointment to see the property in mid-September.
After verifying the condition of the property, we made an offer. Elliott thought it over, taking into consideration the time and energy he’d already invested in trying to sell the house and the costs associated with listing it again. He decided it would be easier and more cost effective to sell to Express Homebuyers.
The Details of Selling Rental Property with Tenants
Knowing how to sell rental property with tenants in Washington, DC is complex. You must follow the District of Columbia’s regulations for purchasing tenant occupied properties as mandated by the Tenant Opportunity to Purchase Act (TOPA). Express Homebuyers had to file all the proper paperwork and provide the tenants with a first right of refusal. Because this series of steps can be intricate, we had our attorneys, at our cost, handle the entire process to ensure everything was done to code. We make sure the legal process is managed properly and the transaction is easy for you.
It took two months to properly file and process all the required documents and once that was finished, Express Homebuyers purchased the property. Elliott happily walked away with cash in hand.
Selling rental property with tenants presents unique challenges. Communication at all stages is critical! Understanding that this is not a normal sale and involving all parties in the plan can help make this situation easier for everyone. If you choose to work with a real estate agent, choosing one who has experience working with tenants is key. They can offer advice and ideas to create a solid working environment that benefits everyone. More information, more conversations and more communication from landlord, real estate agent and tenant can keep the process moving forward in a positive direction.
Mary Needed to Sell Her Condo
Mary owned an Americana Finnmark condo in Silver Spring, MD. She had purchased this rental property with her daughter, but her daughter had recently passed away. When Mary decided to sell the condo she contacted Express Homebuyers for an offer. During our conversation, she revealed that the tenant was her brother.
She felt obligated to give him an opportunity to buy the property. If her brother was unable to make the purchase, then she’d be more than happy to sell to us. A few weeks later, we contacted Mary to learn her brother was not going to be able to purchase the condo. She was going to sell to Express Homebuyers.
We met with her to conduct our home visit and found its condition as she had described. We solidified our offer and moved forward with the necessary paperwork. Once we had the clear title letter and were ready to close, Mary informed her brother that he needed to vacate to finalize the sale. However, he wasn’t able to move out immediately.
The brother had made plans to purchase a new home, but due to unforeseen circumstances, the sale didn’t go through. Now he had nowhere to go. Because the sale to Express Homebuyers wasn’t completely closed, we couldn’t fully pay Mary.
With the understanding that these things happen, we still gave Mary a $3,000 advancement. We also gave her brother the time needed to find a new place to live. Once he finally found a place to live, we closed the sale and gave Mary the remainder of her money.
What If Your Tenants Won’t Cooperate?
A tenant can be your biggest sales advantage. They are a neutral third party who can speak with the buyers about the benefits of living in the home. An unhappy tenant can also sink the sale and cost you thousands of dollars in profit.
Frank had a home in the Lake Ridge neighborhood of Virginia that he wanted to sell. The property needed a few repairs, but that wasn’t the worst of it. He had originally purchased the home 10 years earlier to rent out to his daughter. She and her friends had always made their payments on time and the situation had proved beneficial to both parties for a long time. Eventually, though, they stopped paying, forcing Frank to take funds out of his 401k.
Furthermore, they hadn’t taken care of the property very well and now it was falling into decay. That was the final straw for Frank. He couldn’t allow his daughter to take advantage of him anymore.
After Frank spoke with Express Homebuyers and scheduled a home visit, we confirmed what repairs were necessary to make the property livable again. We agreed on an offer price and Frank wanted to move forward immediately. We ended up purchasing the property about a week later, freeing him from his freeloading burden.
Situations such as Frank’s are not uncommon.
In Washington, DC Beware of TOPA
Martina called on a Wednesday morning, frantically hoping to sell her house as fast as she could.
Years ago, Martina’s mother wanted to buy this house in the Brightwood neighborhood of Washington DC. Martina supported her financially and added her mom’s name to the title. The newly purchased home needed a lot of repairs, so Martina took care of them before she moved in. Unfortunately, within a few months, her mother passed away. Martina wanted to sell the home.
At the same time however, Martina’s sister needed a place to live and Martina allowed her to move into the house.
The agreement they had was that her sister would live there and pay rent while they prepared the house for sale. The rent would cover the mortgage, the house would appreciate in value over the months, and her sister would have a roof over her head. A win-win situation for everyone.
Unfortunately, it didn’t work out that way.
Martina decided not to sell the house right away because her sister needed her help. But, the sister didn’t return the favor. She moved, in along with her three adult daughters, and agreed to switch the utilities to her name. Weeks rolled into months. Months rolled into years. One day Martina woke up and it had been three full years of occupancy and she hadn’t received any money for rent! Furthermore, her sister hadn’t put even a dime to utilities!
Martina could no longer afford to put any more money into the house. Understandably, the relationship with her sister was already strained. And once Martina decided to remove her sister and nieces from the house in order to put it up for sale, the situation deteriorated to combative.
Unfortunately, when she tried to have her sister and nieces evicted, Martina didn’t follow the proper legal procedure, so she wasn’t successful.
Washington, DC is one of the most pro-tenant jurisdictions in the entire country. If you want to evict a tenant in DC, you need to know the intricacies of the complex laws or hire an attorney who does. A major problem for many landlords who own one or two properties is they don’t have the money to hire an attorney, because they are cash strapped from not having received the rent due to them. That was the case for Martina. And to make matters worse, her sister and nieces were able to obtain free legal counsel to help them through the legal process.
Although Martina was skeptical after hearing Express Homebuyers commercials on TV and radio, she called to discuss her options. She answered a few questions and quickly received a cash offer for her property.
We met with her the very next to assess and verify the condition of the house. Express Homebuyers helped her complete the paperwork and took care of every detail going forward.
The title work was pulled and the home was owned in tenants in entirety – which means the house didn’t have to pass through probate to be sold. The good news was Martina’s mother’s share of the house reverted to Martina at her time of death. The bad news was that in DC, tenants have the first right of refusal to purchase any property they live in. This is called TOPA – Tenant Opportunity to Purchase Act. If you own a rental home or property in Washington DC, you must give your current tenants an opportunity to purchase the home for the same price as what the seller is offering. This is a complex legal process that, if not followed properly, can result in stiff penalties to the landlord. For more information on the process, please see here.
After a landlord tenant attorney drafted the required TOPA documents and served (via a process server) the tenants with the papers, the tenants – Martina’s sister and nieces – had 30 days to respond, but they never did. Eventually, the tenants were forced to move out. Once Express Homebuyers purchased the house, Martina no longer owed payments for her house, her mortgage was paid off and she ended the 3-year nightmare.
Time is Money When Selling Rental Property with Tenants
Time is money, and the faster you can sell the property, the less time and money you are wasting. Though it may be easier to wait until the lease expires to put your home on the market, with enough planning and tenants who are cooperative, you can sell your home without having it sit vacant for months.
Are you currently dealing with problem tenants, or even good tenants, who are making it difficult to sell your rental property? Is the property in need of repairs, but you don’t have the money or time to get the work done? Call Express Homebuyers today at (877) 804-5252.