There are a number of reasons you may need to sell a house that currently has tenants. Perhaps you rented the home to keep a flow of income while searching for a buyer, maybe you’re trying to downsize or maybe you’re ready to leave the rental business altogether. This post will explain how to deal with both potential buyers and tenants in two common home sale situations.
Talking to Buyers
Situation 1 – Selling to Investors:
Selling a house that is already occupied by tenants with a good track record will appeal to other investors. Why? Because, A). they won’t have to spend their time and money fixing up the property and B). they won’t have to wait to see returns on their investment while they look for new tenants. Best yet, you can provide substantiated proof of the value of the investment by showing exactly how much money it draws compared to the bills associated with ownership. Savvy investors view this as the perfect situation to buy in to, making your sale super easy.
Situation 2 – Selling to Homeowners:
If you’re selling to someone interested in using your property as a personal home, they most likely won’t want to keep the existing tenants – at least not long-term – unless the home has a built-in income property. Depending on your local laws, the new owner may or may not be able to terminate the renter’s lease early. If you’re facing this situation, you may be able to convince the buyer that it’s a sound business decision to live in a temporary home and collect rent money until the lease is up, then not renew it.Your other option is to give your renters notice and delay your sale until their lease is up. Whatever the situation, make sure you know the the rules, weigh the pros and cons and discuss all viable options with interested buyers.
Talking to Existing Tenants
Regardless of who you’re selling to, you will have to deal directly with your existing tenants. Again, make sure you know how much notice you have to give by law and follow those guidelines at a bare minimum. So what should you tell your tenants?
Situation 1 – If Renters Can Stay:
Renters know that when an ownership change takes place, there can be big changes. They immediately think rent might go up, new fees may be incurred, their security deposit could be at risk, they could be priced out of the property or they may be asked to leave.
The best way to handle worried tenants is to be direct and explain the situation at hand. Let them know what the potential outcomes are, how much time they have and how you’ll be able to help, if at all.
If you have the option, personally introduce the tenants to the new owner and be available to answer their questions. If they’ve been great tenants, do what you can to keep them happy and encourage your buyer to make minimal change, at least early on, to make the transition easy.
Situation 2 – If Renters Have to Leave:
In most cases, your renters aren’t going to love the idea of a home sale because as we all know, moving is a big pain in the you-know-what. Your tenants will be especially bummed if you’ve been a great landlord. On the other hand, they knew the day they signed the dotted line on their lease that they might be asked to leave if you decided to sell the property.
In this circumstance, local laws dictate how the lease needs to be managed. Whatever the scenario, it’s up to you to communicate with your renters far in advance so they have an opportunity to figure out what they’re going to do. For best results, be direct, keep communication channels open, be helpful whenever possible and keep your renters updated on the progress of the sale. Follow the golden rule by treating your tenants the way you’d want to be treated in their situation to maintain a positive working relationship.
Hopefully this post helped you decide the best way to manage the process of selling a home with tenants!