Will Tenants in Your Listing Doom Your Chances for a Sale??

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Original content by John Elwell

Noentry A colleague and I had a listing in Zephyrhills, Florida that was a rental home. When we first took the listing it had some deadbeat tenants in it and it was a mess. We entered it on day one, and when we came out we were covered with fleas! After a fumigation and a complete emptying of the home (a lot done by us), a total cleaning was conducted, a lockbox placed on the door, and the home was "on the market".

Unfortunately, in our current market this type of home draws more buyers who want to use FHA financing, something that is hard to work out with this home due to its age, wiring, etc. The seller would have had to spend a lot of money and do a lot of work to bring it up to HUD standards, and he was not able do that. But the home was shown a number of times, and we had hopes that an investor using cash or conventional financing might come forward to purchase it. That. we thought, would be the most likely outcome.

However, several months later, the owner said he could not afford to have it vacant any longer so he rented it to some tenants who promised him that there "would be no problem when the home needed to be shown". As often happens, what is promised is not what is done. And it does not seem to matter if the rental property is a basic house or a $500,000 home.

On many occasions I called to arrange showing appointments, but with no cooperation from the occupants. One time they did agree to a time, but when the agent and buyers arrived the tenants would not open the door. The agent could hear them inside, but they refused to answer the door. After that, they stopped answering their phones and did not return voice messages that we left. So for all practical purposes, this home was off the market since it could not be shown to any buyers.

When the listing period ended we did not renew it since it made no sense to continue to spend time and money on a property that we had no chance of selling. No one is going to buy a "pig in a poke". The seller, who went through a divorce and needed to sell the home, was up the creek. However, there is nothing we could do. He had effectively tied our hands.

Sellers of rental properties need to:

1. Make sure that they and their tenants clearly understand each others rights when it comes to showing the homes to potential buyers.

2. Landlord sellers need to know federal, state and local laws that regulate when and how a property can be shown. These can vary greatly from area-to-area. Your lease with the tenant should clearly state what both parties' rights are under the law. You as the owner need to make sure that the tenants comply so that your agents can do their jobs. Agents cannot initiate a legal action since they are not parties to the agreement between the landlord and the tenants.

3. Landlords also need to clearly inform their real estate agents about any special restrictions that may apply due to contractual agreements between the tenants and the owners. For example, state law may mandate a 24 hour notice before a showing, but an owner may have been more lenient and given a promise of 48 hours. Your REALTORĀ® needs to know this.

4. Be aware that a vacant property is MUCH easier to show, and therefore, may sell much more quickly than one that is occupied. Easy and immediate access is a big plus. Delays and hassles are NOT! So if a property is already vacant, you may want to think long and hard about putting a tenant in it.

5. Often new tenants will convince you that they will cooperate completely when you need to show the home. But once they are in, you will be amazed at the excuses that some of them will come up with and the roadblocks they will put up to prevent entry. You need to be clear from the onset that problems of this type will not be put up with and that if necessary, appropriate and swift legal action will be taken. You might also remind them that when they do eventually move, you want to be able to give them good references. Remember, you are only asking them to obey the law and your lease, just as you have done. Of course, if you are not a very good landlord and have not adhered to the law or lease, then you will have a problem convincing your tenants that they should. So be a good landlord.

6. Tell tenants, if the law allows, that the property will need to be shown whether or not they are at home or not. Otherwise, trying to coordinate showings with all of their schedules will be nearly impossible. Trust me.

7. If you allow tenants with unfriendly dogs to rent the property, keep in mind that even if the tenant will let your agent and buyers to enter the house or apartment, they may hesitate to do so due to the danger or perceived danger that exists. If the renters have indoor cats, you will likely have odor issues that could cause a buyer to reject your property.

8. Do not blame your agent if your home languishes on the market due to uncooperative tenants. Your agent has a contract with YOU, not the tenants. The occupants' contract is with you, and it is your responsibility to make sure they comply with contractual obligations in regard to access for real estate agents and prospective purchasers.

Both landlords and tenants have rights AND responsibilities. The better both parties clearly understand these, the more likely it is that the landlord will be better able to market his property.

If you have any questions or need more information about this topic, or real estate in general, please feel free to call me at: 813-783-4444 or e-mail me at: jelwell1@tampabay.rr.com

I also invite you to visit my website where I think you will find a lot of useful information. To get there just click on the following link: www.jelwell.century21bnr.com

Comments (1)

Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

We've had some success with offering the tenant a decent rent credit off the last month's rent (or last month before house is sold) payable at closing if they agree to be cooperative.

Having said that, tenants are quite often the kiss of death for listings - especially if they fancy themselves the purchaser but are incapable of qualifying . . .

May 24, 2010 05:05 AM