Guide to Selling a House with Tenants

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In this article, we’ll explore some of the challenges of selling a house or rental property with tenants, tips for selling a house with tenants, and how Blue Aqua Homes can help walk property owners through the process. 

Can I Sell a House with Tenants?

For homeowners or rental property investors there might come a time where they have to ask, “Is selling a house with tenants a possibility?” The answer is not a simple one: It depends on the situation. From the interested buying party to the tenants occupying the home or rental property, there are numerous parties involved with selling a house with tenants, so many investors will try to avoid it. 

There are a few hurdles and challenges of selling a space with tenants, but that doesn’t mean it’s impossible. There are many strategies for selling a house with tenants that can provide investors with options for moving forward with other options. As long as there is clear communication, unanimous understanding, and a solid selling process, selling a house with tenants is more simple than one might think. 

What Does Tenant Occupied Mean?

When it comes to selling a house or rental property with tenants still living there, it can be a complicated legal matter. “Tenant-occupied” means that an existing lease is still in effect and attached to the property rather than the owner. Tenants may still be inhabiting the space, and until there is intervention on the end of the owner attempting to sell, those tenants have the right to occupy the space.

Challenges of Selling a House with Tenants

Selling a tenant-occupied home will look a little different than listing a traditional property, but that does not mean it can’t be done. Keeping that in mind, no one should be selling a house with tenants inhabiting without knowing what obstacles lay ahead of them. Here are a few of the most common challenges to consider before attempting to sell a tenant-occupied home: 

Smaller Buying Pool

Arguably one of the bigger obstacles investors face when selling a house with tenants is appealing to a smaller pool of buyers. Many buyers are not willing to take on tenants, and instead want a property they can move into right away. A tenant-occupied home can discourage many traditional buyers, as they are likely selling a previous home or moving out of a rental on a set timeline. Tenants will impact the listing and selling process. Keep in mind that this may cause the property to sit on the market for longer than expected as there’s a smaller number of buyers in the market willing to purchase a property with tenants in place. 

Marketing and Tours are More Difficult

It can be harder to schedule the necessary showings, inspections, appraisals, and more with tenants living in the property. You will need to provide them with advance notice, and it can be challenging to coordinate with multiple people. Further, you want to avoid frustrating your tenants with constant requests to get inside the home. Buyers may become less interested in the property in favor of homes with more flexible showings, which can further decrease your pool of buyers. COVID restrictions also make it difficult to have open houses, as there may be limits and restrictions on the number of people allowed in the home at one time. 

Property Condition is Out of Control

Clean, tidy, and staged homes generally tend to sell faster and for higher amounts than those who are not. Selling a house with tenants can challenge this industry norm because the property’s condition will be largely out of your control during the selling process. You will not be able to stage the property or have it vacant for listing photos and showings. The cleanliness of the home will depend on the cleanliness and tidiness of the tenant. 

Sellers will also need to deal with the fact that they will have less opportunities to fix or upgrade anything before potential showings or even the home inspection. Without an idea of the condition of the property, the inability to complete needed inspections might really hurt your chances of selling. Not only does this impact the potential to add value to the home, but buyers may find themselves in a stronger position to negotiate the final sale price further down, depending on the results of the home inspection. 

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Tips for Selling a House or Rental Property with Tenants

As covered, while there are obstacles involved, it’s not impossible to sell a house or rental property with tenants still occupying the space. In fact, the challenges above should not discourage you from selling your tenant-occupied home. There are several creative solutions that can be used to get the most of your investment property: 

• Wait until the home is vacant to sell
• Incentivize tenants with cash for keys
• Sell to a Cash buyer  

Wait Until Property is Vacant

Depending on how quickly you need to sell, you can wait until the property is vacant to put it up for sale. This can help attract more buyers and give you control over the condition of the property. However, there are certain regulations to consider when waiting for a vacancy. You will likely need to issue a 30 or 60-day notice to the tenants, depending on how long they have been in the home. In simplest terms, if you’re attempting to sell a home with tenants and they are already due to leave soon, waiting might be easiest. 

This calls into question multiple notices and important paperwork that, if not completed correctly, could invalidate and complicate the eviction process even further.  It is also important to consider the additional tenant protections that were added in San Diego county as a result COVID-19. As of the time of this writing (January 2022) the eviction moratorium is likely to continue through the end of 2022. Especially for those selling a rental property with tenants, it might be easiest to recruit the help of a property manager to help navigate those conversations. 

Provide Tenants Incentives to Vacate

Another option in selling a house with tenants is through a cash for keys agreement, which essentially means paying tenants a sum of money to move out of the property within a certain number of days. This can create a win-win scenario where the owner gains possession of the home earlier than the lease expiration date and the tenant receives cash that they can use to transition to their next living situation. These legally-binding private contracts are a great way to incentivize tenants to move out before the end of the lease (and to avoid the legal hurdles of an eviction). 

This can allow you to sell the property sooner, but it does come at a cost. If you’re wondering: “How much should I give a tenant for cash for keys?” There is no correct answer or industry standard. While there is not a set amount you have to offer, there are regulations surrounding cash for keys renters’ rights. Consider how long the tenants have lived in the property, how early they’re leaving, and how much you can offer without undermining your return on investment. 

Sell to a Cash Buyer

There are buyers who are willing to take on tenant-occupied properties by either keeping the tenants in place or paying and facilitating a cash for keys agreement with the tenants directly. This is a great way to sell the property quickly and avoid losing money with a cash for keys agreement. Investors may find this to be the most convenient solution because they will not have to wait for the property to be vacant. Cash buyers, like Blue Aqua Homes, will also be able to close on the property in as little as three to five days. 

Cash buyers typically accept as-is properties, allowing for minimal inspections and viewing. Blue Aqua Homes will request two appointments at the home. While other buyers may need more time at the property, this is still a quick timeline compared to traditional transactions. Less property walkthroughs and inspections means less coordinating with and disturbing of the current tenants in place. This creates a relatively seamless experience for tenants, as the buyers assume the same terms of the lease. Security deposit money would transfer at the time of the sale, and you as the seller can move on after a clean, successful, easy transaction when selling a house with tenants. 

Tips for Selling a Rental Property with Tenants

Within this article we’ve mostly explored how selling a property with tenants works in the context of a home or house. Selling a rental property provides an additional layer of legal considerations, as a mortgage works differently than an apartment or rental lease. In actuality, the process of selling a tenant-occupied rental property works very similarly to selling a house with tenants. 

When selling a rental property it’s often easier to manipulate the numbers in the landlord’s favor, such as offering a lower rent for their remaining months as an incentive to vacate earlier. Since the landlord has more direct control over the investment property, their options are slightly expanded. Lower rent can also be offered as an incentive for allowing more tours and to encourage the tenants to keep their property clean and tidy for showings. 

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Selling a House with Tenants is Simple with Blue Aqua Homes! 

It is entirely possible to sell a home with tenants in place — though it can present some challenges. Property owners will need to coordinate with tenants to successfully market the property to a smaller pool of buyers. Luckily, there are a few alternatives that can provide investors with a quick sale and simple closing. Consider how a cash buyer could help you sell your tenant-occupied home, so you can get started on your next investment opportunity.

source: https://www.cthomesllc.com/can-you-sell-a-tenant-occupied-home/