Selling a Tenant Occupied Home

Real Estate Agent with Long and Foster REALTORS®, Gainesville, VA VA License # 0225089470

Selling a Tenant Occupied Home

Landlords who sell their rental properties and deal with the ideal tenants that clean, stage and otherwise cooperate with the home owner in the process are rare.  The majority of tenants consider the task of living in a home that is being marketed for sale as a a major inconvenience to them.  They don't want to clean, restrict show times and make the process more difficult and take longer than it should.

I consulted with a home owner today who is facing a Short Sale of his tenant occupied townhouse.  It's been in property management for a few years so I don't think the owner had any idea that he would hear from me after my picture-taking appointment with the tenant, with the sound of absolute disgust in my voice.  I seriously wonder if there is some sort of ritualistic ceremony happening where they take their morning coffee and dump it on the carpet on the way out the door.  A sacrifice to the traffic Gods of Northern Virginia maybe?  I have no clue how a carpet gets THAT dirty.  

The owner called me today, since he is facing a Bank of America Cooperative Short Sale (one in which we have not yet been given the pre-approved price...but that's another story) and has only 60 days left to market the property according to the good folks at REBC who are the third party vendor handling the sale.  We know the price needs to reflect the current condition, but also needs to be high enough for Bank of America to accept.  So his question was should he hire someone to clean the house and the carpets.

There's no cut and dried answer.  Sure.  He could do that, or just open his car window and throw that money out of it next time he's on the highway.  It's going to do no good either way.  Clearly, the tenants have no concept of clean.  And what's worse, is that by taking ownership of the clean up before the lease is up may very well have the owner of the home in position where he can not collect the security deposit to compensate him for the damages to the home.  And clearly, he deserves that money.

So what's a Short Sale seller to do when dealing with a tenant?  The same thing I advise all my sellers to do who deal with tenants.  Incentivize them to cooperate.  Offer them a month's free rent, or a significant discount on rent, if the home is cleaned, staged and able to be shown with a wide variety of show times.  If a tenant has no financial incentive to help, they most likely aren't going to.  Just a thought.


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Cindy Jones
Integrity Real Estate Group - Woodbridge, VA
Pentagon, Fort Belvoir & Quantico Real Estate News

A good number of my DoD HAP sales have been tenant occupied.  Most have gone well but there have been a few where the owners had to make them a deal, just as you suggested, to make them be a bit more willing to agree to showings.

May 23, 2012 11:26 AM #1
Morgan Evans
Douglas Elliman Real Estate - Manhattan, NY

The tenant occupied sale is always difficult, but having the experience to know how to work the situation is so important.

May 23, 2012 12:50 PM #2
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

Tenant occupied short sales can be a nightmare especially when the tenants realize they have been payinbg every month and the money has not been used to pay the mortgage. I have seen deliberate damage to keeping us out all together. It is important to talk to and get that tenant to cooperate. Being able to keep them in the property when the new buyer closes always seems to help.

May 23, 2012 11:31 PM #3
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Chris Ann - It's not just short sales, either. Dealing with tenants in any sale situation can be a nightmare, with declined showings, disgusting housekeeping and property damage. We always expect something "interesting" when we show one of these, and our advice to our investor/sellers is usually to get the tenant out first, clean the place up, and then put it on the market. Even in today's market, many of these just can't be sold in their current state.

May 24, 2012 01:06 AM #4
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Cindy:  It's hard for landlords to think in terms of long term gain, especially when there is a Short Sale and no money to be made.  But if you can't sell the home, there is no Short Sale, plain and simple.

Morgan:  All we can do is give advice.

Scott:  That's another wrinkle in the topic, though in the case of the coffee stained carpet, the mortgage is being paid on time to this day.

Dick:  And landlords are terrified to wait until the place is vacant to sell.  What if it sits for too long?  It's a tough situation.

May 24, 2012 01:53 AM #5
Kathryn Maguire (757) 560-0881 - Chesapeake, VA
Serving Chesapeake, Norfolk, VA Beach

Unfortunately, bribery to get them to act appropriately is sometimes the only best way around bad tenant behavior.  That is, short of getting them to move out first!

May 24, 2012 02:08 AM #6
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Selling an owner occupied home can be challenging enough, toss in a tenant occupied and a not so tidy one at that  . . . oy vey.  But, with the property incentive, they might be very cooperative. Especially if one can mention that having the place cleaned by sellers and then KEEPING it clean upon move out is a good way to ensure the rental of their full security deposit.

May 24, 2012 06:14 AM #7
Chris Ann Cleland
Long and Foster REALTORS®, Gainesville, VA - Bristow, VA
Associate Broker, Bristow, VA

Kathryn:  But the concern with getting them to move out is the same reason most landlords won't incentivize them.  They don't want to be out of pocket the money.  

Carla:  That's a good way to look at the cleaning from a tenant's perspective if done by the landlord.

May 24, 2012 07:13 AM #8
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Chris Ann Cleland

Associate Broker, Bristow, VA
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