Selling My House While These Damn Tenants Are In It...

By
Real Estate Agent with RE/MAX Compass, formerly RE/MAX WHP 0524642
https://activerain.com/droplet/4Cfc

One of the most difficult situations for a home seller to be in is to try and sell their home while it is occupied by a tenant. Tenants don't have an incentive to see the home sell. And quite frankly, most of them couldn't care less if it does. Sadly, this entire attitude problem can be dealt with, managed and straightened out in advance. Managing expectations and making sure the lease agreement is correctly written can save the seller, tenant, property manger and everyone else involved a lot of aggravation.

In Texas, Realtors are required to use a standard lease agreement that is 14 pages long. There's also the opportunity for the Landlord to add a set of Landlord Rules at the time the lease takes place. Something as simple as a hand written clause (by the Landlord) can state that during the last 30 days of the lease the Tenant will be notified 2 hours in advance of each showing. If Tenant refuses the showing, alters the time-period of the showing or attempts to reschedule the showing the tenant will have $100 deducted from their security deposit. 

Tenants are notorious for canceling showings, rescheduling showings and sitting in the house during showings. The "I don't care attitude" must be managed upfront, not during the last 30 days of the lease which brings me to my next issue....

 

I tried to show a house last week and the listing agent told me that if my buyer wanted to purchase the home that they couldn't close for at least 60 days as the lease allowed the tenant a 60 day notice versus the very customary 30 days. If you list your home for sale and it is tenant occupied your lease should dictate that the tenant will be given a 30 days MAX notice that their the month-to-month lease will terminate, not 60 or 90! You should also charge your tenant 2-3 times the rent if they want to pay a flat fee to reject any and all showings during the last 30-60-90 days of the lease. Typically during the last 30 days of a lease you can begin to market the subject property. It definitely benefits the home owner to try and get 60 or even 90 days incorporated into the lease to market the property. This would mean more showings for the owner.

 

If you want to incentivize the situation you can offer a $500.00 reward to the tenant if the home sells during the last 30 days of the lease. This gives the motivation for the tenant to clean the house! It makes them think twice about laying around in their underwear while eating Cheetos when the house shows. This could also be promoted early on at the beginning of the lease.

 

The majority of lease situations (in all price ranges) are difficult when it comes to showing the property.

 

Another thing to consider is making sure your tenants sign off on the document that lets them know the house is showing. The document reminds the tenant to remove their valuables and provides disclosure about the showing process. This document should be signed EARLY ON when the lease is signed. Again, this is about managing expectations upfront and not at the 11th hour.

 

One of the worst things that can happen is when the tenant doesn't move-out and as a result torpedoes the entire transaction because they're squatting. The seller can then become liable and found in default of the sales contract. The whole situation could get expensive, nasty and not fun.

 

Why would a tenant do this? 


The most popular reason could be that they can't "get into another home." This is what happens when you welcome a substandard tenant who barely qualified. NEVER just approve a tenant for the sake of doing so, especially when you're considering selling at the end of the lease! Other Landlords and listing agents may not be so accommodating. It would be in a sellers best interest to hire a seasoned Realtor to be aware of all these situations and how best to rectify them. I do my best to help the tenant "get out." This can be accomplished by actually showing the tenant properties or even helping them with a good reference a few months before the lease ends. If  the tenant has their own agent it's wise to tap on your watch and remind them to call their agent. 

Posted by

 

 
Greg Nino
, Houston area Realtor®.
Helping residential buyers, sellers and tenants 7 days a week.
Available @ 832-298-8555 

RE/MAX Compass (Formerly RE/MAX WHP)

www.GiveMeMyHomesValue.com

www.EverydayHoustonHomes.Com

 

 

The information contained in this blog is believed to be reliable and while every effort is made to assure that the information is as accurate as possible, the author of this blog, and its comments disclaim any implied warranty or representation about it's accuracy, completeness or appropriateness for any particular purpose. All information is copywritten and the property of Greg Nino.  

 

 

 

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Dale Taylor 04/20/2015 11:38 AM
Topic:
Home Selling
Location:
Texas
Groups:
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Rainmaker
323,839
Melissa Brown
Helen Adams Realty - Charlotte, NC
Realtor - South Charlotte NC Homes for Sale

Great post, Greg!  Laughed out load over the comment about the tenants lying around in their underwear and eating Cheetos!  Nice visual...

That being said, I always urge the seller to wait until the tenants are out, then he/I will have control over the marketing process.

Apr 20, 2015 04:21 AM #33
Rainer
40,876
Frank Nolan
Nolan Realty Team / Pacific home Brokers - Palos Verdes Peninsula, CA
Jump and the net will appear

I think it is better to manage the expectations of a seller up front and just have them give the tenants the appropriate notice and move them out prior to showing the home. This will then give the seller a chance to prep the home for sale and showing. You have to put yourself in the tenant shoes. It is their home. They may not own it but they are paying for it and they have every right to their privacy. There is no benefit to them at all to have people wandering through their home. If it is an investor buying the property then an accepted offer subject to interior inspection can minimize the disruption to the tenant/s.

Apr 20, 2015 04:22 AM #34
Rainmaker
179,907
Sonsie Conroy
I serve buyers and sellers everywhere in San Luis Obispo County - San Luis Obispo, CA
Energetic, Enthusiastic, Knowledgeable Realtor

I would much prefer to offer incentives instead of threatening legal action. And here in CA, that is often the only way to go. I don't like listing homes with tenants, but you can make the sale if you go about it the right way. Reduced rent, offering bonuses for ease of showing, restricting showings to a reasonable window that offers the least inconvenience to all concerned, etc., are tactics that go a long way toward soling the problem.

Apr 20, 2015 04:36 AM #35
Rainmaker
1,533,851
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

I like that phrase for not letting showings happen! Fine them a few $$'s & the tenant will start caring.

Apr 20, 2015 04:49 AM #36
Rainer
283,976
Doyle Lee Austin Davison Iv
Surf City Realty 714-968-6767 - Huntington Beach, CA
28+ years serving Investors Banks Buyers-sellers

I deal with 2-10 units a lot and this is a huge headache. owners have to strategically plan selling with renters. some renters are great while others bring on Grey hair.. 

Apr 20, 2015 05:15 AM #37
Rainmaker
1,022,671
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

I have had some luck offering tenants a $50-100 rent discount if they are cooperative with showings and willing to keep the property clean. 

Apr 20, 2015 06:10 AM #38
Rainer
245,400
John Rakoci
Eagle Realty - North Myrtle Beach, SC
North Myrtle Beach Coastal Carolinas

Most renters here know the sale is coming and plan to move, some ask to go before their lease is up if they find a place they wish to go. Usually, the home is left in OK but certainly not good condition. I show homes with tenents often but will not take a listing until they are gone.

Apr 20, 2015 06:22 AM #39
Rainer
302,767
Andrea HoffDomin
Florida Dream Homes Realty - Fort Lauderdale, FL
- in Real Estate always on your side!

Thanks for sharing this interesting details. Especially the "punishments" for torpedoing the showings.

Sunny greetings from Fort Lauderdale, Florida.

Apr 20, 2015 06:58 AM #40
Rainmaker
241,564
Christi Farrington
Dagny's Real Estate - Wilton, CT
~ Your representative in Fairfield County, CT

Yikes, I'm dealing with this now!!  

I have a client to whom I rented a house 1.5 years ago (1 year and extended 6 months).  Since that time,  I found them a house to purchase.  They will be moving 2 weeks prior to end of  the lease but will pay in full. 

However, the owner has decided to list the house. Over the weekend, my clients called me in a panic and asked me what to do.  I did say that I can't give legal advice but sent them a copy of their Fully Executed Lease - it never mentions anything about listing or showing the property during their tenancy.  

Any thoughts?

Apr 20, 2015 08:00 AM #41
Rainer
145,773
Theresa Akin
CORPUS CHRISTI REALTY GROUP - Corpus Christi, TX

My biggest pet peeve when showing tenant occupied is not mentioned in MLS. Just says call LA for showing instructions. One listing took forever to reach the agent. I sent email, text and left a message the evening before 5:00p.m. Needed to show next day around 11 a.m. Agent replies, "Oh no that won't work they need 4 hours notice. Agent didn't like my suggesting she putthat information in the MLS. Also the tenant worked the midnight to morning shift. We moved onto the next and never went back.

Apr 20, 2015 08:02 AM #42
Rainer
86,414
Mike Kelly,CRS,CIPS
The MJKelly Team - Santa Rosa, CA
"One of Sonoma County's Natural Resources"

State of California, except any city which has rent control, the tenant is given 24 hours notice to allow a showing of the property or a viewing by the landlord. I feel for tenants however. Many new landlord purchase rental properties and proceed to increase the rents enormously. One Senior Citizen complex the landlord decided to charge for their parking spaces! California rents are rocketing as high as our prices--higher in some areas. I try to the tenant that a cooperative tenant experience will impress a new investor. But it is a major conundrum. If we have our druthers we have the owner/landlord give them notice so we can do repairs and staging (if a single family dwelling) as the limitations of giving 24 or 48 hours is onerous.

Apr 20, 2015 08:08 AM #43
Rainmaker
83,748
Ernest Villafranca
Better Homes and Gardens Real Estate - Oakland, CA
3923 Grand Ave. Oakland CA, 510-418-9443

Tenants?! Get your "Notice to Enter Tenant's Unit" forms, and tell the seller he has to acompany you the first time.

Apr 20, 2015 10:37 AM #44
Rainmaker
370,463
Travis "the SOLD man" Parker; Associate Broker
iXL Real Estate-Wiregrasss\ - Enterprise, AL
email: Travis@theSOLDman.me / cell: 334-494-7846

Similar to what was mentioned in the OP, I've had owners offer tenants a FREE last month's rent if they cooperate & leave it in good condition. And, a few times, to even move early.

Apr 20, 2015 01:11 PM #45
Rainmaker
1,484,062
Georgie Hunter R(S) 58089
Hawai'i Life Real Estate Brokers - Haiku, HI
Maui Real Estate sales and lifestyle info

Very good advice!  We have to give tenants 45 days notice to vacate here.  I really don't like having listings with tenants AND hostile property managers.

Apr 20, 2015 02:59 PM #46
Rainer
477,014
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Great post about planning ahead rather than later. Unfortunately, most investors with tenants manage their own properties and most commit all the things you pointed to in your post.

I know a few of those type investors unfortunately who were only too eager to rent their property without fully qualifying their prospective tenants and ultimately paid a step price for their lack of due diligence. 

Apr 20, 2015 06:20 PM #47
Rainmaker
240,507
Sarah, John Rummage
Benchmark Realty LLC, Nashville TN 615.516.5233 - Nashville, TN
Love Being Realtors® in the Nashville TN Area!

Greg, it is an exercise in futility, in my opinion, to try to sell a tenant occupied property. Tenants can start out being nice and cooperative, but it never continues. Best advice to landlords is to think ahead and prepare the lease and the renters for the END of the lease, and the possibility of selling the property, even if selling is not on their mind then.  

Little bonuses have worked well too. I have seen landlords not have calls returned by problem tenants, but all of a sudden they appear and are very cooperative when cash for keys is proposed. It takes what it takes! 

Apr 21, 2015 01:54 AM #49
Rainmaker
1,060,712
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

As a listing agent for a landlord/seller, I make certain the tenant is involved in the showing instructions. It helps when they know when to expect showings.

Apr 21, 2015 06:49 AM #50
Ambassador
891,596
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Insightful post Greg.  I really like the idea of a lease that offers incentive to a tenant to help the home sell.  That could make an indifferent tenant willing to go above & beyond to help a sale proceed.

Apr 21, 2015 09:34 AM #51
Rainmaker
798,059
Troy Erickson AZ Realtor (602) 295-6807
Good Company Real Estate www.ChandlerRealEstate.weebly.com - Chandler, AZ
Your Chandler, Ahwatukee, and East Valley Realtor

Greg - Good advice on how to deal with selling a home while tenants are still living in it.

Apr 24, 2015 05:45 AM #52
Rainmaker
375,172
M.C. Dwyer
Century 21 Showcase REALTORs - Felton, CA
Santa Cruz Mountains Property Specialist

Great post, Greg. While we have to follow different laws here in CA, I've also found early communication with tenants PLUS financial incentives helpful.

Apr 26, 2015 03:14 AM #53
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Greg Nino

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