As a property manager, a common question that I have been encountering recently is how do I sell a property with a tenant in a lease and what are the pros and cons of selling a rented house? I have compiled a list of considerations that you need to consider when you have a tenant living in the home and you plan to sell.
Firstly, be assured that tenants cannot be immediately kicked out of the home, simply because you want to put it up for sale. The lease conveys over all other contracts and must be executed in full regardless of who owns the home.
You can put your property on the market while tenants are occupying it however if the home is sold they get to stay in the rented property until the rental agreement expires. So, in short, the tenant would “come with” the property.
However, with my years of experience as being a property manager. I would not recommend selling a rented property until the tenants move out due the hassle and extra technicalities that come with it. There is a higher chance that your tenants will not be pleased with the fact that potential buyers (strangers) will be viewing the home they are residing in. This causes the home not to show as well which will make it much more difficult to get a decent offer in a timely manner. Some realtors may try to push that option because they want to get paid as soon as possible but considering all the factors, selling a tenanted house is not a favorable option. It is usually a better option to allow the tenant to move out, get the home prepped for market, and then to place it on the market.
Here is a list of recommendations if you are planning to sell a home with a tenant:
- So, if you are selling the property or plan to do so in future, give notice that you will not be renewing the lease to your tenants with as much notice as possible.
- Be courteous and empathetic while notifying them of non-renewal of the lease.
- If possible, assisting the tenant in finding a new place to reside will facilitate both the parties and speed up the process.
- Before making the final decision on selling the home note that currently, the single-family property rental market is appreciating higher than the home sales market and you could be better off keeping the tenant and holding onto the property as an investment.
- Once your tenants move out, you can clean up and renovate the house. Renovate and clean it if you can before placing it up on the market for sale or re-rent. In this way, you are likely to sell it faster and at a much higher price.
One thing we are seeing due to the lack of rental housing currently available in Southern Maryland it is becoming more common for tenants to hold over (stay beyond the lease) because they cannot find a new rental home.
In that case, you must file tenant holdover eviction in district court. A tenant holdover eviction suit in District court is troublesome because judges are usually lenient towards the tenants and let them stay several more months beyond the lease. Ultimately, you will enter a lingering phase of tension and that will take on average 2-6 months or longer to free up the property and cost thousands of dollars in legal fees, lost rent, and contactor costs. We find often in this situation your tenants may not pay the rent because they must save for the new security deposit on a new residence and feel they have nothing to lose as they are already being “kicked out” by the landlord. In this situation we have found in some circumstances the need to offer the tenant a cash incentive to voluntarily vacate the home in good condition before the eviction proceeds to the removal stage.
To conclude, if you plan to present your property with a tenant for sale, you need to make a thorough consideration of all the parameters. For queries or assistance, feel free to contact us at Real Property Management Gold.
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