Selling your 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.
Wouldn’t you rather your tenant boast about the nice schools and pretty view instead of the leaky faucet and street noise? Of course!
Click HERE to watch the video.
Plan In Advance: Talk With Your Tenants
Before you do anything else, meet with your tenants. If possible, meet someplace for coffee or dinner and really talk. This 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.
Communication at all stages is critical! More information, more conversations and more communication from landlord, real estate agent and tenant can keep the process moving forward in a positive direction.
Tips For Selling Rental Property With Tenants
- Meet with the tenants and explain the situation. Help them understand your goals and needs and ask for their help.
- Meet with your real estate agent and the tenants to make introductions and talk about the process and their needs. Create a team environment with all parties.
- Provide assurance that you will work with them and consider their needs in the process. If the expectation is that they will move once the home sells, then talk about that process and determine a fair amount of notice once the home sells. These terms can be addressed in the sales contract to ensure that they have time to move.
- Discuss the home showings once the property is listed. Determine a plan for showings, including how much notice they would like and how they wish to be notified.
- Create a block of time for showings that is mutually agreeable. Perhaps they can offer the work day hours and a few blocks of time each weekend while the kids are in school or soccer games. Listen to their needs and demonstrate a willingness to accommodate them.
- Explain the sales process and escrow time frames and assure them that you will keep them informed of each stage and what you might need from them.
- Offer to pay for a house cleaner and/or gardener to help keep the home staged to relieve their burden.
- Ask if there will be other expenses involved in showing the home and offer to compensate for this. Perhaps they will need to be out of the house more often, a nice dinner gift certificate or entrance to an amusement facility could help offset the need to be away from home.
- Ask what you can do to make the process easier for them.
How To Handle An Uncooperative Tenant
Of course you know that you should avoid an angry tenant at all costs, but sometimes there is nothing you can do to reassure them and they become uncooperative. Perhaps the relationship has been damaged long before the sales process started and they are unwilling to help with the sale. Your goal should be to remove the tenant or the hostility prior to having buyers enter the property. Selling a rental with an unhappy tenant can be done, but you must take extra care in the process.
As with the cooperative tenant, meeting and discussing the situation is important. Again, discuss your motives in selling and ask them for their feelings about the situation. Demonstrate compassion and listen carefully for their concerns and how you might help them. Bring the lease and discuss its terms. If the lease has expired or if they have a month-to-month lease, ask them if they would like to move out prior to the listing.
If moving is unfeasible, discuss the process and expectations on both sides. What does the inconvenience entail for them and what are the costs involved? Again, asking if they would like to purchase the home is a considerate question as this has been their home. Assure them that you will work with any potential buyers to provide the least amount of inconvenience possible.
There are some options for gaining cooperation from an unhappy tenant.
- Offer a reduced rent in exchange for their cooperation with showings.
- Offer to reimburse them for moving expenses.
- Offer to return their security in advance so they can use it to rent a new home.
- Provide a nice reference letter. This can be especially valuable if the relationship has become strained before this sale.
- Consider paying the tenant a bonus to move. This can be effective to both terminate a lease early or to provide incentive for a good transition period at the close. Often this bonus needs to be a substantial offer, perhaps as much as a month’s rent.
Selling rental property with tenants presents unique challenges. Understanding that this is not a normal sale and involving all parties in the plan can help make this situation easier for everyone. A real estate agent who has experience working with tenants is critical. They can offer advice and ideas to create a solid working environment that benefits everyone. 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. Planning in advance, open communication and generosity can help mitigate this risk and make moving on profitable for both landlord and tenant.