How To Smoothly Sell Your Tenant Occupied Property

Over the years, I’ve helped hundreds of clients navigate this process. I personally prefer to vacate tenants and sell a vacant, staged house that’s ready for any new owner—not just investors. However, this approach may not always be the best option. If you’re selling in the middle of your tenant’s lease, or if the house is in good condition with a reliable, paying tenant, it might make more sense to keep the tenant in place. Additionally, if investors tend to be the primary buyers in that part of town...well, "When In Rome."

First, before doing anything, consider your options when selling a tenant-occupied home:

• Can the tenant afford and are they interested in purchasing the property?
  Even if they do not buy, offering them the first opportunity can foster goodwill and cooperation later. According to recent market data, tenants who are offered the chance to buy are more likely to cooperate during the sale process, reducing delays and complications.

• Are they on a month-to-month lease?
  If so, you may be able to exercise your 30 or 60-day notice option, but consult your state laws (especially in California, where notice requirements vary). In many areas, tenants must receive specific notice periods, and there may be costs involved, such as paying for the notice period or relocation assistance.
  It may also cost you less to sell a home the "new owners" are already 100% familiar with...especially if they are the reason for it's current condition.

• Wait out the lease or the required notice period, then list the property cleaned and staged. Check your state laws for the required Notice To Vacate time periods, typically it's 30-60 days depending on how long the tenant has lived in the home. Vacant, clean and staged homes tend to sell faster and often at a higher price—studies show staged homes sell 73% faster and for more money on average.

• Offer cash for keys.
  This can be an effective strategy—such as offering reduced rent for an early move-out or a lump-sum bonus if they vacate by a certain date. For example, some landlords offer 50% off the last month’s rent plus e.g. a $5,000 moving bonus for tenants who vacate by a specified deadline. The incentive loses value with each day of delay, motivating quick action.

• Check for an early termination clause in your lease.
  Does your lease contain one? This could streamline the process and eliminate the need for other solutions, saving time and resources.

By carefully weighing these options, you can choose the most efficient approach tailored to your situation and local laws.

Let's tackle the tenant in place scenario. First we need to assume the tenants are being cooperative with your process of showings and inspections and ultimately the sale. If they are not cooperative, refer to options 1-5 above, it's not worth trying to sell with uncooperative tenants - it's a nightmare I can share from experience.

Step One: Showings - give them notice of the sale and ask them to agree to a minimum of two weekdays and one weekend day for showings. The weekdays ideally are afternoons to accommodate after work showings and the Sat or Sun showing day would be ideally 12-4 or something similar to typical open house schedule in your market. Also, and this is very important, do they have a new born with as feeding and napping schedule to consider or pets to contain or coordinate showings around?

Step Two: Presentation - Advise in the form of a polite request that they to limit clutter especially in the kitchen and bedrooms, no laundry piles, dirty dishes, etc. Also, remind them to hide any prescriptions, small electronics and jewelry.

Establish whether or not agents may show the home unescorted or do you need to be present for all showings? Remind the tenants the more often you can show the home in the first 3 weeks, the shorter the disruption will be long term, since the easy access gets you in escrow faster.

Step Three: Good Communication - demonstrate empathy for the inconvenience of this disruption - there's nothing in it for them after all and checking in with the tenant maintains a cooperative interaction and a better experience for everyone.
I like to offer little rewards along the way to keep the tenants happy and cooperative: thank you notes with a Starbucks card in it, offering to have their home professionally cleaned, dropping off a nice house plant or fresh flowers (staging trick) to brighten up their day and the house.

Treat tenants like clients, not "just tenants". Show them the same respect you’d give your best clients and friends, and you’ll foster a much more positive interaction than those who don’t.
Always answer their questions, offer assistance with relocation if needed, and share your plans with them so they feel included. Keep them informed about “what’s next,” and you’ll often receive appreciation and cooperation in return.
They feel displaced and without control, this respect gives them back some of that sense of control over what's transpiring.

For more information about selling your tenant-occupied property in any state, please contact Thomas J. Nelson. He will put The Nelson Network to work for you!