As you may be aware, there are unique challenges to selling properties with tenants
in place — a scenario that can impact the sales process, the property’s marketability,
and, ultimately, the outcome for your clients. Below are some of the challenges and
and potential solutions:
Lease Agreements that Survive the Sale
Many leases include provisions that protect the tenant’s right to remain in the home
through the term of the lease, even after a change in ownership. For Buyers seeking
a primary residence (approximately 83%, according to NAR), this can be a significant
deterrent, as they may not want to inherit tenants.
It’s crucial for all parties to understand the lease terms clearly and explore whether
early termination or renegotiation with tenants is an option.
Property Condition and Tenant Cooperation
Tenants living in a property listed for sale can significantly affect its presentation.
Unlike homeowners motivated to stage their property for Buyers, tenants often lack
the incentive to keep the home clean, tidy, and presentable. Unkempt or cluttered
spaces can leave a poor first impression, reducing Buyer interest and potentially even
lowering the property’s value.
Availability and Access Issues
Most lease agreements require landlords to provide tenants with notice before the
property can be entered for showings, often 24-48 hours or more. While this notice is
essential to protect tenant rights, it can create hurdles in today’s fast-paced real
estate market. Buyers often expect same-day access, especially in competitive
markets where timing is critical. Delayed access can lead to missed opportunities
and longer days on market.
Balancing Act: Landlord Income vs. Sales Process
Landlords are often hesitant to remove tenants before listing their property, because
the rental income offsets mortgage obligations and other expenses. While this is a
valid concern, it’s essential to balance the short-term benefit of rental income with
the long-term goal of achieving a smooth and profitable sale.
Potential Solution: “Cash for Keys”
One effective solution is offering tenants a “cash for keys” agreement. This approach
provides financial incentives for tenants to cooperate during the sales process.
Incentives may include:
● A cash payment for keeping the property in a presentable condition
● Additional compensation for granting flexible access for showings
● A negotiated sum for voluntarily terminating the lease early, enabling the
property to be sold vacant or staged
The “cash for keys” strategy not only improves marketability but also fosters goodwill
between landlords and tenants, reducing potential conflicts during the process.
It’s also crucial for the parties to establish an agreement regarding financial
responsibilities once the tenants vacate — including who will provide access to the
property, cover the mortgage payments, maintain property upkeep, and pay utilities
until the house sells.
In a perfect world, the property is sold vacant, cosmetic repairs are made, the house
is staged, and access is unrestricted. Realistically, this isn’t always possible, so when
it’s not, rest assured the aforementioned strategies can help ensure time and value
are not compromised.
If you have questions about listing a house with tenants or would like to discuss
specific cases, please don’t hesitate to reach out.
Houston Divorce Realtor – (281) 450-1810
