Why Selling a House with Tenants in Place Might Not Be the Best Idea

When it comes to selling a rental property, timing is everything. One of the most crucial decisions a property owner faces is whether to list the property while tenants are still living there. Jason Born, Broker of Born Real Estate, shares his insight: “In my experience, selling a home with tenants in place often leads to complications. I always recommend listing the property unoccupied if possible to ensure the home is presented in the best possible light and attracts strong offers.” While it may seem like a convenient option to market the home immediately, there are several key reasons why this approach could negatively impact your ability to sell the property at the best price. Let’s explore why selling a house with tenants in place might not be the best decision.

1. Reduced Appeal to Buyers

First impressions matter, and that’s especially true when it comes to selling real estate. Buyers want to see a clean, well-maintained home that feels inviting. When a property is tenant-occupied, keeping it in a show-ready condition can be difficult. Unlike owner-occupied homes, tenants may not have the same motivation to keep the property pristine for prospective buyers. Personal items, clutter, or general wear and tear from daily life may diminish the home’s appeal, making it harder for buyers to envision themselves living in the space.

2. Challenges with Showings

Scheduling showings around a tenant’s routine can create logistical headaches. Tenants have limited availability for open houses or private viewings, making it difficult for potential buyers to access the property at convenient times. This limits the home’s exposure to prospective buyers, so fewer people may get the chance to tour the property. Additionally, some tenants may not be as cooperative as necessary, leading to last-minute cancellations or rushed showings, which can negatively impact the selling process.

3. Lower Offers and Buyer Hesitation

Tenants living in the home during showings can cause buyers to feel disconnected from the property. It’s harder for them to imagine themselves living in a house that is currently someone else’s home. This lack of emotional attachment can result in lower offers or reduced enthusiasm to purchase. Buyers may also have concerns about potential damage caused by tenants or worry that the property hasn’t been well-maintained. These perceptions can lead to lower offers or fewer offers overall.

4. Potential for Tenant Disruption

While some tenants may be understanding and helpful during the sale process, others may not be as accommodating. An uncooperative tenant can complicate the selling experience in many ways. For instance, they may refuse to make the property available for showings, leave the home in poor condition, or even engage negatively with prospective buyers during visits. This lack of cooperation can derail your sale and lengthen the time the property stays on the market.

5. Reduced Buyer Pool

Many buyers, particularly those looking for a home to live in rather than an investment property, prefer purchasing vacant homes. When a property is tenant-occupied, it can limit the buyer pool to primarily investors. While investor interest is not inherently bad, investors typically expect to purchase properties at discounted prices, especially when they inherit tenants. This can result in lower sale prices than selling to owner-occupiers willing to pay top dollar for a move-in-ready home.

6. Legal and Ethical Considerations

Selling a home with tenants in place may also bring up legal considerations, depending on your local laws. Tenants often have rights that protect them from excessive disruptions, such as laws regarding how much notice must be given for showings or inspections. In some areas, tenants have the right to remain in the property until the end of their lease, even after the home is sold. Navigating these legal obligations can complicate the sale and cause delays if you’re not careful.

What Are Your Alternatives?

Given these potential challenges, there are alternative strategies that may help you achieve a smoother and more profitable sale:

• Wait for the Lease to Expire: Selling the property once the tenants have vacated will allow you to present the home in its best condition. It will also be easier to stage the home for showings and will likely appeal to a broader range of buyers.
• Negotiate an Early Move-Out: Sometimes, offering your tenants an incentive to move out early may help expedite the sale process. This could be through offering them a rent reduction or covering moving costs.
• Sell to Investors Only: If you are set on selling while the property is tenant-occupied, targeting investors as your primary buyer audience can make the process easier. Investors are often more accustomed to purchasing properties with tenants in place, though this route may lead to lower offers.

Conclusion

While selling a rental property with tenants still living in it can seem like a quick way to get the property on the market, it can come with significant challenges. Reduced property appeal, difficulties with showings, and the potential for lower offers are some of the reasons why it may be worth waiting until the tenants have moved out. As Jason Born, Broker of Born Real Estate, advises: “An unoccupied home is always easier to market and sell at the best price. No matter how cooperative, tenants can create barriers to presenting the home in its best condition.” By taking the time to consider your options and timing the sale appropriately, you can improve your chances of getting the best possible price for your property while minimizing stress along the way.