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Selling a Home With a Renter

House for Sale that is Sold

Lately we’ve been seeing a lot of homes being sold with tenants occupying the property. Reasons for this have to do with owners not being able to afford the home being vacant while it’s for sale, or an owner needs to put the home on the market prior to the tenant’s lease ending. If you’re an owner wanting to sell your home with tenants, you may want to think twice. And a lot of it depends on the personality of your tenants.

Let’s weigh the benefits of having tenants occupying the house vs. not occupying a house. The positive side of tenant occupancy during a sale an owner will receive rent while it’s occupied. That’s it. The benefits stop here.

The down side of having the home occupied by tenants is they can make showings difficult. If the home is not readily accessible, people can’t see it. While a home is for sale, a home’s occupant will get asked by buyer’s agents to accommodate a last minute showing. This happens when buyer’s go to meet with their agent to see homes and ask, “oh by the way can we see this one too?” Happens all too often and it’s essential to capture every single showing. As a seller, you inevitably will if your tenants aren’t flexible or easy going enough to allow these showings. If the home can’t be seen, it will sit on the market causing potential buyers to lose interest and be more likely to present lowball offers.

Another down side is your tenants might not keep the place tidy and clutter free. To give you an example of how important having a home show-ready is, home staging has been proven to sell a home for 5% more in value and 83% less time on the market. Not having a home looking show ready can have the opposite effect, the home is likely to sell slower and for less money. So although you might receive money in rent, the value of the home could drop by much more than your rent received if your tenants are making showings difficult and not keeping the house looking show ready.

If your tenants are on a month to month lease or are nearing the end of a lease, it’s best to let them vacate before trying to sell. But what if you absolutely have to sell a home with a tenant? If the tenants have 7 more months in their lease, you are legally bound to honor it and so is a potential buyer. If you have to sell anyway, here are some ideas of how to work with them. Offer a rent reduction in exchange for complying with agent showings on short notice. Get it in writing in the form of an addendum to the lease. This way if they don’t comply they lose their rent reduction. Also offer to pay for a biweekly cleaning service while the home is for sale. As an agent, I send tenants of my listings Starbucks gift cards so they have some place to go while the home is being shown. Offer to buy them lunch on Sundays when Open Houses occur. Showing respect for your tenants is always a good idea while listing a home for sale.

If you have more questions or would like to discuss a rental home you’re thinking of selling, please contact me.