If you want to sell a tenant-occupied home, it can be more difficult than normal home selling. Your tenants have legal protections, and there is also the lease agreement to consider and whether or not it is a month-to-month lease or an annual lease.

While this can create more problems when a seller wants to sell a property that is tenant-occupied there are ways around these issues. We review the things you can do to make home selling easier for you as well as the tenant when selling new buyer your rental property.

Choosing the Right Option

Familiarising yourself with the lease agreement should help you avoid running into legal issues. The details in the agreement should help you choose which approach will work best.

Waiting Until Your Tenant Leaves

It will be easier to sell the home if the tenant has already left. If your tenant doesn’t have long left on the lease agreement or they are renting month to month, letting the contract expire should be the best option.

Selling without tenants will be a lot easier, without the need to make arrangements with them for showings or worry about the condition of the home. Without tenants, you can do a deep clean of the property and fix any problems that will put off buyers. The sale of the property will not change the terms of the lease.

If your tenant doesn’t want to move out when the agreement comes to an end, you will have to give them the correct amount of proper notice when you decide to sell a tenant-occupied property. This should be outlined in the rental agreement, but there will also be local laws to follow. Hopefully, you do not have a bad tenant or an uncooperative tenant when you sell a tenant-occupied property.

Selling a Home With Tenants in Place

If you don’t expect your tenant to be leaving anytime soon, you can still sell the home. This can create more problems if the home isn’t kept tidy or if the tenant decides to try and put off potential buyers. Buyers will have real estate questions that they will want to know about the property. It is possible to sell a tenant-occupied property and the easiest way is to use good communication with all parties involved.

This situation will limit prospective buyers, but it can be beneficial for some. Real estate investors might be happy to buy a home with tenants, as it saves them from finding their own.

However, the terms of the lease agreement may not be what the investor was looking for. The lease terms of the original lease agreement will stay in place when transferring to the new home buyer. Perhaps the real estate investor or new buyer will prefer different screening rules or charge more in rent. Already having a tenant isn’t necessarily great for all investors purchasing an investment property.

Stay on Good Terms With Your Tenant

If you can maintain a good relationship with your tenant, you might find that selling the home isn’t as difficult as it could be when you sell a tenant-occupied property. If you let your tenant know of your intentions to sell the property, you might even find that they could be a potential buyer. This will help you avoid many things that you would otherwise need to do to sell the home, making your money available sooner.

Even if your tenant isn’t looking to buy, having good relations with them makes them more likely to be willing to keep the property clean and ready for showings. They might also be happier to assist your real estate agent when showings have been arranged. When selling a home to a new owner, it is a good idea for the new buyer to maintain that relationship with the tenants during the home buying process.

Motivating Your Tenant to Help You

If you aren’t on great terms with your tenant, there are other ways you can get them to help when you sell a tenant-occupied property. Offering an incentive might make selling the home easier and save you money in the long run. The incentive could be a refund on their security deposit, for example.

If your tenant keeps the home tidy and makes the job of the real estate agent easy, you could give them an incentive when a buyer is found. You shouldn’t give them an incentive upfront, as this isn’t going to motivate them as well as the later reward will.

You could also use an incentive to encourage your tenant to move out of the property sooner than the tenant’s lease agreement states. This will be easier if you have a clause in the agreement for early termination. Though even without this, it should be possible to reach an agreement with the tenant over the amount of money that will get them to agree to move sooner.

If your tenant is nearer to the end of their lease agreement or if you are generally on good terms with them, offering help with moving expenses might be enough encouragement. Offering to pay the security deposit for their next rental home is another option you can use to incentivize your current tenants. If the lease does not have an early termination clause, then they have the right to remain in the property until the lease ends.

Successful Home Selling with Tenants

Unfortunately, the following of these suggestions won’t guarantee things go well. But taking the time to consider your tenant and keeping them informed, gives you a better chance of selling the home without problems.

If you do get help to sell the property from your existing tenant, don’t forget to thank them and make sure they understand changes that affect them. Be sure to explain to the tenants that they will have a new landlord as most people understand they have tenant’s rights.

Incentivize the Tenants to Move Out

If the home buyer is interested in purchasing the home and does not have tenants in place, then the tenants can be incentivized to terminate their lease agreement earlier. A landlord can offer a gift card or other financial incentive to the tenants. The tenants do have a legal right to stay in the property in accordance with the original lease.

Selling a Vacant Home

If your tenants decide to move out during the home selling process, then the home will be vacant. There are drawbacks when selling a vacant home including the risk of vandalism. If the home is vacant, then there are tips to safeguard your vacant home during the home selling process. Investors that are buying a second home will be aware of the scenario with tenants.

Final Thoughts

When an investor wants to sell a tenant-occupied property, they will be working closely with a listing agent. The listing agent will coordinate all the marketing, ensuring that the home is ready for professional photography, coordinate showings, and negotiate the offers. Another important task that a real estate agent is to ensure there is an appealing listing description for the MLS.

Good communication with the tenants right in the beginning is essential to ensure a smooth transaction for all parties involved.

About the Author

The article “8 Necessary Steps to Sell a Tenant-Occupied Property” was written by Sharon Paxson, one of the best Newport Beach Real Estate agents. With experience since 2005, representing buyers, sellers, and landlords, we welcome the opportunity to share our expertise with you and guide you through your real estate transaction.