How To Sell Tenant Occupied Properties

A tenant-occupied home or condo can present special challenges to a Seller.  How you initially deal with the tenant or tenants will often determine if it will be a smooth process or an adversarial nightmare.

Here’s a spectacular example of what not to do when dealing with existing tenants…One Seller was caught on camera giving prospective buyers tips on how to evict the existing tenants. Ooops!

To determine what you should do, follow these seven tips:

1. Know the rules…

You should be familiar with your state’s tenant laws. When first meeting with sellers wanting to list their rental property, get a copy of the lease or leases. Review them with the landlord.

Tenants have rights. Violating those rights, could result in a lawsuit and even criminal charges.

2. Meet and greet…

It is normally a good idea to contact the tenant or tenants first. Showing up unannounced and informing the tenants that you are there to sell “their” home is not generally received well.

If the tenants are protected by a lease, you, the landlord, may wish to reassure them of that.   Remember, that under no circumstances should you approach the tenant with a my-way-or-the-highway attitude.

Then you can contact the tenant and set up an appointment to meet and view the property. Don’t show up at the door with a for-sale sign under your arm and a lock box in your hand.

3. Show empathy and compassion…

Regardless of what the laws in your state are, you need to remember that most tenants will feel threatened when you show up. They have a legitimate concern that you are about to make them homeless. In the Oakland case mentioned, the tenants had every right to be concerned.

If the tenants have a lease, a good way to start the conversation is to assure them that their lease protects them. In most states, a new owner is bound by the terms of an existing lease.

Be compassionate. The tenants may wish to tell you about the improvements they made, or how they have created beautiful gardens. In some cases, they will tell you how their children grew up in the home. Listen and be empathetic.

4. Make the tenant your ally…

Tenant cooperation is the key to selling a rental property. If the tenant makes scheduling showings difficult, or is disruptive at the showing, this decreases the chances of you selling the property.

To address this issue, I suggest that many of the prospective buyers could very well be the tenant’s future landlord. It is likely that the prospective new landlord will form an opinion of the tenant. I stress that a good impression will most likely be beneficial to the tenant in the future.

5. Consider that the tenant might be the buyer…

When first meeting with the tenant, I always ask if they might be interested in purchasing the property. Although many people rent due to limited finances or poor credit, that is not always the case.

If the tenant expresses an interest, immediately get them in contact with a lender or mortgage broker.

6. Showing the property…

If the tenant is present when the property is being shown, be polite and present them in a positive manner. Introduce them to the prospective buyer and add a compliment about the tenant.

Under no circumstances should you discuss evictions or lease terms with prospective buyers while showing the property.

Even if the tenant is not present, there could be recording or security devices in operation. If you are having a really bad day, like the agents in Oakland, your comments could end up on the evening news.

7. When all else fails…

Sometimes, no matter how well you handled things, you may end up with a problematic tenant. If that’s the case, then you may need to meet with an attorney and decide what to do.

If the lease is nearing an end, or it’s a month-to-month arrangement, then not renewing might be the best solution. In other cases, you may wish to wait until the lease expires or contact an attorney and explore eviction options.