Sell an Occupied House with Tenants Legally
Property investment is a smart way to attain financial security. Snapping up a good deal and either flipping it or renting it out to tenants while property values rise can mean a nice chunk of cash.
Property investment becomes a little riskier, though, when obstacles get in the way of that payday goal, such as the aforementioned tenants.
Once you invite others to live on your property, they also become a significant consideration for the future of that property. That’s right—the very tenants who made it possible to hold onto that little diamond in the rough might very well hold you back from cashing in when the time comes.
Luckily, there are ways to navigate the tenant-landlord relationship through this challenge. Read on for some helpful tips on selling an occupied house with tenants living in it.
Can You Sell an Occupied House With Tenants?
The short answer here is that yes, it is possible to sell a house still occupied by tenants.
There are exceptions based on your location. However, in most states, tenants generally maintain the right to stay in the property through the remainder of their lease. So you can’t evict them illegally or use shady tactics to force them to move against their will before the lease is up.
Still, it’s your property to sell if you wish. So long as you respect and adhere to the tenant’s rights, you can sell it despite the property having inhabitants.
That said, there are certainly some complicated logistics behind this statement. You’ll want to review local and federal tenants’ rights ordinances to avoid committing any violations.
The landlord-tenant relationship is also a vital one and one that you may wish to maintain long-term, or at least keep healthy and workable. With that in mind, talking to your tenant about your desire to sell should be first on your to-do list.
The tenant might be willing to move before their lease is up. On the other hand, they might clue you in on some reasons why it’s an inconvenient time for them.
Either way, the option to sell is still on the table. However, open communication with your tenant could help you make some practical and time-sensitive decisions that ultimately prevent a ton of hassle later. An intelligent
Along the lines of avoiding legal violations, you should also go through your lease with a keen eye. Particularly in situations of long-term tenancy, there might be provisions in the lease — both in your or the tenant’s favor — that you are entirely forgetting.
Even if you have the legal right to sell, per local housing laws and tenant boards, a clause in the lease could still prevent you from doing so. Always double-check first before you make any serious moves.
How to Sell an Occupied House With Tenants
As noted above, the lease agreement dictates your options when selling the home you’ve been renting out to tenants.
That said, there are various types of leases (mainly fixed-term and month-to-month), which means there are also various paths you can take here.
Tenants With Fixed-Term Leases
Selling an occupied home is more straightforward with tenants on fixed-term leases.
Basically, the options are waiting to sell until the lease is up or selling to a buyer willing to take on the tenants themselves. The type of buyer you find might also impact the situation.
A) Wait Until the Lease Is Up to Sell
Sure, let’s dive into the details of this option:
Option A: Wait Until the Lease Is Up to Sell
When it comes to selling a property that’s currently leased, one straightforward approach is to hold off on selling until the current tenant’s lease agreement expires. While this might seem like a waiting game, it can come with several benefits and reduce potential complications.
First things first, putting your selling plans on pause until the lease concludes is the simplest path to take. Legally speaking, there’s no foundation for the tenant to object or try to prevent you from selling once their lease term is up. The end of their lease marks the end of your contractual commitment to them.
Now, let’s talk logistics. Waiting for the lease to end can also save you from a good deal of stress. Think about coordinating repairs and property showings around your tenant’s schedule – it can be quite a puzzle. By waiting, you’ll avoid this headache and have the freedom to maintain the property in optimal condition, something that’s often not feasible when the tenant is in residence.
Here’s another key point: a tenant, whether knowingly or not, can inadvertently create obstacles during the sale process. From making the property difficult to show to causing delays or issues, their presence can complicate matters. By patiently waiting until they’ve moved out and you’re no longer responsible for them, you remove these potential roadblocks in the real estate journey.
In a nutshell, waiting until the lease concludes provides you with a clean slate and greater control over the selling process. It ensures that you’re not navigating the complexities of selling while also managing a tenant. So, if you’re looking for a smoother route without unnecessary complications, this approach might be your ticket.
B) List With Tenants in Place
Life happens, and plans change – that includes your plans and circumstances. There could be a plethora of reasons why waiting for the lease to end isn’t feasible, and you need to act swiftly. Selling your property while the lease is still active doesn’t necessarily mean you’re breaking any rules or treating your tenants unfairly. It’s about aligning with your own timeline and needs, which can sometimes be urgent.
Now, let’s talk reality. Selling a property with tenants still residing there is a bit more complex than an empty place, but it’s definitely doable. It’s an option that can accommodate your needs while also respecting your tenants’ circumstances.
Here’s the deal – while this approach might be a solution for you, it’s important to be prepared for potential reactions from your tenants. They might have legitimate concerns about how this decision affects their own tenancy. They could be worried about rent increases, the uncertainty of lease renewal, or even the potential invasion of their privacy during property showings. After all, change can be unsettling.
However, remember this: just as your reasons for speeding up the listing timeline are valid, their concerns are valid too. Transparent and open communication is your best friend here. By discussing your needs and reasons for listing with your tenants, you can go a long way in easing any tensions and avoiding more significant issues down the road.
In a nutshell, while listing your house while tenants are still in place comes with a few potential hurdles, it’s a path that can balance your needs with your tenants’ concerns. Communication is key, and by addressing their worries and explaining your situation, you might just find a workable solution that benefits both parties.
C) Sell to a Cash Buyer Directly
Considering the Ideal Buyer and Selling to a Cash Buyer
Another layer to this puzzle is your ideal buyer. If you happen to know that your potential buyer has plans to use the property as a rental, that tidbit of information might just help ease some of your tenant’s concerns.
Imagine this scenario: your tenant discovers that the new owner intends to continue renting out the property. Suddenly, the prospect of a new owner might not seem as daunting. It can provide a sense of stability for your tenant, knowing that the transition won’t disrupt their housing situation drastically.
Now, here’s a game-changer – selling directly to a cash buyer. It’s a move that can significantly reduce the annoyances and red tape that often rile up tenants during the traditional selling process. Think about it – no more people traipsing through their living spaces for inspections, evaluations, and whatnot.
When selling directly to a cash buyer, like Fast Easy Offer, the changes for your tenant are minimal. In fact, the only noticeable shift might be the name on the check they receive on the first of every month. The rest? It remains pretty much business as usual for them.
So, if you’re looking for a solution that respects your tenant’s concerns, takes your ideal buyer into account, and minimizes disruptions, selling directly to a cash buyer could be the golden ticket. It’s an option that combines convenience with peace of mind, for both you and your tenant.
Tenants with Month-to-Month Leases
Unfortunately, when the tenant has a month-to-month lease, your options are a little messier for getting the go-ahead to put your house on the market. What options you do have, however, are listed here.
There’s no expiration date on the lease, which means you have to actively come to an agreed conclusion on it with the tenant. You’ll have to renegotiate the terms, likely with some added benefit to the tenant, which could get costly and time-consuming for you.
Reduced rent or a couple of subsidized months usually do the trick as good incentives and commonly done ways to functionally “buy out” the tenant from their lease.
Alternatively, depending on the state or region, you might be able to terminate the lease. Although some rent-controlled cities and states vary on this, in most places, no specific reason is necessary for the landlord to terminate a month-to-month lease, so long as you aren’t acting on housing discrimination.
You’ll want to make sure you still follow the proper protocol for terminating a lease, though, which always involves a minimum required amount of notice (e.g., the thirty-day notice standard). Even the fastest, most direct cash sales usually take longer than thirty days to close, so this should still leave plenty of time for you to sell and your tenant to find new housing.
You also might have to serve the termination notice in a specific font and typeface or on specially formatted letterhead. Be sure to consult your area’s statutes or else risk a deficient termination notice that doesn’t hold up in court.
What to Do if Your Tenants Don’t Want to Leave?
The reality is, no matter how much communication you strive for with your tenants, they might still be very resistant to leaving. They might like the school district, be unable to afford moving costs, have relatives nearby who need them in proximity…the list goes on.
You should expect at least some amount of resistance when broaching the topic of moving to your tenants.
Like anything else, communicating with them might solve a lot of the hesitancy. Here are some suggestions on options you can offer to your tenants in light of a move.
Offer to Sell to Them First
The house is your property, but it’s also their home. Your tenants might have developed an attachment to the place, especially if they have lived there for a long time. Whether it be for reasons related to family, finances, location, or otherwise, the fact of the matter is that the house works for them in ways that other houses don’t.
This history actually makes your tenants the perfect candidates to buy the property themselves, in many cases. It saves them the headache of looking for a new place and paying for moving costs, and it saves you the expense of going through more formal listing procedures. Win-win.
If they aren’t financially able to purchase right away but expect to be in the future, there are rent-to-own or owner financing options. These financing options would give them the time to raise credit or cash for a loan while still providing you with a reliable buyer.
Offer an Incentive
Your tenant might be willing to move—with the right nudge. If they see the move as something that could benefit them financially, their level of cooperation will likely improve.
There are many inventive options out there to help sweeten the deal. Letting them out of the last month’s rent, offering to pay for the first month somewhere else, or reducing the current rental amount are great ways to get them on board.
Their reason for being disgruntled about the sale might also come from the hassle of you showing the house. In this scenario, you could offer to pay for a professional cleaning service or compensate them for the time they have to be out of the apartment.
Your tenant will likely be a lot more cooperative if the burden of the selling process isn’t falling on their shoulders.
What to Do if Your Tenants Are Causing Trouble?
There’s no way to avoid conflict entirely when asking tenants to move.
However, if they are actively causing chaos to stall the sale, especially if they engage in criminal activity, you might have grounds to outright terminate the lease. As long as their behavior goes against the terms and agreements included in the lease, then you have every right to break it legally.
It is not to say that you should go and seek out lease violations to accuse your tenants. Just if there are some glaring issues, such as intentional property damage or withholding of rent, then you’re no longer beholden to having them stay through to the end.
Selling an inhabited property with tenants is always complicated. Just because it’s in the cards for you to sell, it doesn’t mean that your tenants are necessarily in a place to pack up and move.
However, there are many real estate routes you can take to make the transition smooth and beneficial for all involved. These include renegotiating terms, incentivizing the tenant to move out, or, the best option, selling to a buyer who will continue to honor the lease.
No matter which direction you go, communicating with your tenant from the get-go is crucial if you want to maintain their trust and cooperation.