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Renting out a home is a great way to generate investment income, but chances are a day will come when you want to sell the home. The only problem? You’ll be left wondering can I sell a home with renters in it? In short: Yes, you can.
Here’s what you need to know about selling a home when you have renters living in it.
Can you sell a house with a tenant in it?
You have every right to sell a rental property while you still have tenants living in it. The process may be a bit more awkward than if you were the one living in the home, but it’s perfectly legal to sell the home as long as you follow the terms of the rental agreement and don’t try to force the renter out when they have a right to stay.
How to proceed based on rental agreement
The type of rental agreement you offered to your tenant will determine your next steps for selling a home that is currently being rented.
A month-to-month lease is the most flexible rental agreement for both renters and landlords. Exact timeline requirements will vary by the city and state your property is in, but usually with a month-to-month lease you only need to give the renter 30 or 60 days of notice that they must leave.
In many cases, landlords don’t have to inform month-to-month renters why they are ending the lease. If you want to sell the home while the renter is living there, however, and need to arrange inspections, appraisals, or open houses, it will be best to keep them in the loop.
If your renter signed a fixed-term lease, and it did not include an early termination clause, then your renter can legally remain in the home until the lease ends as long as they continue to pay rent and don’t violate the lease agreement. You can kickstart the selling process before the lease ends, but you can’t expect them to move out early so the new buyers can move in.
Your options if the tenant refuses to leave
Some tenants will understand your decision to sell and won’t stand in your way, while others may feel disgruntled and try to make things more difficult for you. Refusing to leave for open houses or being rude to potential buyers is obviously a problem, but what do you do if the tenant refuses to move out — which is a much bigger problem?
These are a few of your options.
Sell to to the tenant
Your tenant doesn’t have to leave if they choose to buy the home. If they make a fair offer you can save a lot of time and energy trying to find a buyer. When you decide to sell, give them the option to buy the home before you put it up for sale. You don’t have to accept their offer, but it’s nice to have options.
Sell to an investor
Just because you want to sell an investment property doesn’t mean that someone else doesn’t want to rent it out. If you can find someone who wants to buy the home as an investor, they will have the option to continue to rent the home out to the same tenant.
Pay your tenant to leave
This is your least desirable option, but it may help speed up your timeline with a difficult renter. You can offer money to your renter to leave sooner rather than later. Offer to pay their moving costs or to give them back a month’s rent and see if that doesn’t hurry them along.
Pros and cons of letting renters live in the home during a sale
Whether or not you wait until the tenants leave before you put your home on the market is up to you. There are advantages and disadvantages associated with both paths.
Because you likely want to have a buyer lined up as soon as the rent checks stop coming, here are a few pros and cons associated with letting renters live in the home during the sales process.
Pros of keeping your renters in place
- The home is already staged. You won’t have a ton of control over staging while tenants still live in the home, but generally a home with furniture in it is easier to sell than an empty home. NAR found that 82% of buyers’ agents believe that staging makes it easier for a buyer to visualize a home as one they can call their own.
- Attractive to real estate investors. If you choose to sell the property to another investor, your home will be more appealing if they don’t need to line up new renters.
- You don’t lose income. If you show the home while the tenants are still paying rent, you can keep making rental income until you sell the home.
Cons of letting your renters stick around
- Tenants may make showings difficult. If you have a disagreeable tenant who doesn’t want to leave the house during showings, keeps the home messy, or makes it hard for you to show the home in any way, you may struggle to find a buyer.
- Tenants can pose a legal or financial risk. If a tenant owes you back rent or is refusing to vacate the home you can end up in lengthy court proceedings in order to evict them. If you can’t resolve these issues in time before closing day this can cause major problems.
How to be considerate of tenants when selling
If you choose to proceed with selling the home while you still have renters living in it, be thoughtful and considerate of the inconvenience the sale will cause them. You should not treat the sale of a rented home as a normal sale. For example, you shouldn’t put for sale signs in the yard that will attract potential buyers who may want to pop in to see the house as this will cause disturbances for your tenant.
You should also try to limit the number of showings. Schedule open houses where multiple potential buyers can stop by instead of doing private showings. Because you will want your tenants to leave during open houses you should give them ample warning and confirm the open house works with their schedule. To be extra thoughtful, you can give them a gift card for a local restaurant or movie theater so they have somewhere to go during the open house.
Your real estate agent can help you walk through best practices when it comes to selling a home that is rented. Most buyers shouldn’t have a problem with you having renters in the home, but consult with your agent here about how to communicate with potential buyers regarding your current rental situation.
Selling a home with renters living in it requires a bit more work than selling an unoccupied home or one that you’re living in, but it is very doable.