Successfully sell a tenant-occupied listing

REThink Real Estate

Tara-Nicholle Nelson
Inman News™

Q: Presently, my townhouse is occupied by a renter. How do I show it to prospective buyers? –Shelley H.

A: There are several ways to show your home to buyers, even though it is tenant-occupied, but how you proceed depends in part on what your plans are.

Are you trying to sell the property to another investor with the tenant in place as, for example, you might be required to do by eviction control laws, for instance?

Are you trying to sell it to a homeowner who will likely evict the tenant so he can move in?

Or would either of these work for you, as long as someone buys the place?

As the seller of a tenant-occupied property, you face the unusual situation of having little or no control over the staging and cleanliness of the property at the time it is shown. It is not unusual for tenants who know they will be evicted after their home is sold to make efforts to ruin the chances their place will sell. So, tenants have been known to show their homes (and themselves!) to prospective buyers in very messy states.

I once had a former tenant tell me some very wild tales about the lengths to which she had gone to prevent her apartment from selling — including sitting her sticky-faced 4-year-old on the couch during the showing, with a beer! (No joke.)

Others intentionally come off as being problem tenants, even if they are not, complaining about the current landlord or property conditions to would-be buyers in an effort to turn them off and stay in their places as long as possible.

For this reason, many landlords attempt to sell their properties sight unseen — they basically market the property based on its location, financials and exterior only, then invite buyers to make offers contingent on an interior viewing/inspection.

This empowers buyers to back out of or renegotiate the contract quickly and easily if they need to, after having seen the interior; and it prevents sellers from having to go through the rigmarole of disturbing a tenant to set up a showing for all but the very most serious buyers.

Unfortunately, it also puts up a major barrier to buyers, many of whom will not write an offer without seeing the place, and cuts down on what is currently an already-small pool of prospects. My advice is to avoid this strategy with all but the most difficult tenants.

In fact, if you have an extremely difficult or messy tenant and can afford it, consider doing what it takes to have them vacate the property entirely so you can fix and paint it before showing for sale — but check with your broker and a local real estate attorney first to make sure you don’t run afoul of local rent or eviction control mandates.

If you are planning to sell to another landlord only, or are otherwise willing/able to try to help your current tenant continue to rent the place after you sell it, tell the tenant this, so she doesn’t undertake shenanigans to foil your efforts to sell.

If you are planning to sell to an owner-occupant, you might want to implement other incentives for your tenant to show the place in tip-top shape, maybe offering to help defray her moving expenses if and when the property sells.

In either event, ask your listing broker or agent to brief you on any state or local guidelines around showing and selling the property. You might need, for example, to post a written notice of your intention to show the property 24 hours in advance. In some places, you may even need to pay the tenant a move-out allowance, or give 60 days’ notice.

Also, explain the situation to your tenant — let her know what your plans are, explain that you would like to minimize the inconvenience of showing the property, and make arrangements as to how you will notify her of the need to get buyers in to see the place.

For example, consider showing the property only during one or two weekly, preset time frames that jive with your tenant’s calendar (e.g., Tuesdays at 6 p.m. and Saturdays at 1 p.m.). Show a good amount of human kindness and logistical consideration to your tenant, and you’ll have a better chance of getting your townhome sold while the tenant still lives in it.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

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