Selling a tenant occupied house can prove to be quite challenging in some cases. In general, I do not recommend that a house be sold with a tenant in it. However, there are some unique circumstances where it must be done. But if you’re absolutely convinced that you must sell your house with a tenant in it and you cannot be convinced otherwise, here are 7 tips to help you with the sales process.
1. Consider the tenant’s perspective
To the tenant, the sales process is a major inconvenience and headache. If you’ve ever lived in your own home while selling it, you know how you need to be prepared to show the house with little notice, and ideally, without you in it. So, you had to make plans to be out of the house for 30 – 60 minutes at a time at the drop of a hat. You probably also spent a lot of time keeping the house neat and tidy for the same reason. As the seller you were willing to tolerate this inconvenience because it was a necessary evil to accomplish your bigger goal of moving to your new house. Now put yourself in the place of the tenant, with all the inconvenience but none of the reward. Plus, the end result means the tenant has to find a new place to live, despite the fact that they probably don’t want to move. So, their maximum cooperation leads to their impending dislocation and more inconvenience. From a tenant’s perspective there may be more reasons not to cooperate with the sales process than to cooperate. You need to find a way to gain the tenant’s cooperation.
2. Explain the process of selling the home
Take the time to talk and explain the process of selling the home to your tenant. It is important for the tenant to understand what is happening, how you expect the home to look for showings, organizing and clutter, the condition of the exterior and interior of the home, what you will be updating or repairing if necessary, when showings will occur, who will be selling the home so they know who to expect, what inspections will be necessary for the sale and will they be moving out or staying for the duration of their lease. The tenant should be made comfortable, and the landlord should be fully transparent in an attempt to have a smooth sale.
3. Incentivize the tenant
Lead with the carrot, not with the stick. This is a good mantra for leading the tenant to the behavior you seek. Brainstorm different ways that will make it beneficial for the tenant to be cooperative with the sales process. This can range from offering them a lump sum of $X if the house is sold within the listing period, offering the tenant $X per showing or reducing rent or offering a moving expense being covered if necessary. Whatever you choose, make sure you are clear about what requirements the tenant must meet to be eligible for payment and when payment is to be made.
4. Put agreed incentives in writing
The first mistake of the seller is making only a verbal agreement. This leads to a lot of “he said, she said” down the road. Be sure to get any agreements in writing. Take the time to make sure the agreement is well defined. Whatever you agree to, think it through in detail, put it in writing and have all parties sign and date the agreement.
5. Provide proper notice for showings and inspections
Provide proper legal notice to tenants prior to entrance of the property. Legal notice must be served 24 hours in advance. Posting a letter on the front door is not proper legal notice. You need to request the showing and get approval from the tenant. A great way to show the home is through open houses.
6. Be considerate of the tenant
Understand that although you may have done everything up to this point to make the tenant comfortable and cooperative, it’s a stress full time for them too. Do the best you can to be sensitive to their situation and this will lead to a better outcome for everyone.
7. Expect problems, but stay calm
I can guarantee you that you will hit some bumps in the road, but like all things in real estate, you need to take those in stride. The question isn’t if a problem will arise, but when. So, if everything is going smoothly, expect something to pop up that will require your calmness to take over.
Bottom Line
If you have been considering hiring a trusted property manager lets connect and see how we can assist you with your investment property.
