7 options when selling a home with tenants
Published June 22, 2023Share this article
Thinking about selling your rental property but still have tenants living in it? That can complicate things a bit. However, selling isn't out of the question.Every state, county, and city has different rules about selling a home with tenants. For example, Washington state requires landlords to give at least 90 days’ notice to tenants about their intent to sell—and Seattle builds on that law by requiring specific mandatory language in that notice. Consult with local legal counsel to ensure you remain compliant.This guide will walk you through all your options when selling a tenanted property. But first—let's answer the most important question: can you sell a rental property with tenants living in it?Can You Sell a Rental Property With Tenants Living in It? Yes, you can sell your rental property even when tenants are living in it. If your tenant is on a month-to-month contract, this process is simple. You just need to give your tenant adequate notice so that they can find a new place to live before you sell the property.Crisis averted.However, what about when you have a tenant on a long-term contract? What do you do then?Fortunately, you have options.
7 Ways to Sell a House With Tenants
1. Sell the property to a would-be landlord or investor
You've already done the hard work and found them a paying tenant. As long as they have a good track record of on-time payments, most new landlords would be thrilled to purchase an investment property with a tenant already living in it.However, going this route limits your buyer pool. Unless your house is in a hot market, it might be more difficult to sell. Many investors want to qualify their own tenants to ensure they’re up to their standards. And if the rate is currently below market rent, investors will factor this into their offer price.2. Sell the property to a buyer who will let the tenant finish their lease
Some homeowners will purchase a property and honor an existing lease through its expiration. This allows the tenant adequate time to find a replacement dwelling.While this option isn't ideal for buyers, it's doable—especially if it's a hot market with home prices on the rise. However, most mortgage clauses stipulate a 60-day post-close occupancy, so your buyer might have to pay with cash instead of a loan—and this will limit your pool of buyers.Some buyers may not be ready to move yet but would like to secure a piece of property before prices increase further. In this situation, letting the tenant finish their lease post-purchase is a win-win for everyone involved.3. Sell the property after the lease expires
Don't want to deal with the whole tenant situation? Wait until your tenant's lease expires. After that, you can sell the house without any other complications.The only problem with this option is the timing. You may need to sell now, especially if you're looking to use your proceeds to invest in another property. Or, you might want to sell depending on market conditions or during a specific season to get top dollar.Regardless of your unique situation, waiting isn't always an option. However, when it is, it sure does make things simple for you and the tenant. Just make sure you give them adequate notice that you'll be selling the property once their lease expires.4. A bad option: evict your tenant
Now, take this “option” with a grain of salt. You should never evict a tenant without cause. You can only legally evict a tenant if they have made evictable violations to your lease agreement. For example, your tenant might have:- Caused major property damage
- Performed illegal activities on your property
- Been delinquent on multiple rent payments
- Violated a no-pet clause
- Disturbed the neighbors
5. Give your tenant a relocation incentive and then sell
Want to move your tenant out the door sooner? Give them a cash incentive. You might pay them to terminate their lease early, or you could cover their moving costs or a month of rent in their new lease.While these costs can add up, your property could sell for more (and faster) without a tenant inside. Plus, having your tenant out of the property will help with taking pictures and doing showings.Remember, your tenant isn't obligated to take the cash—no matter how much you offer. If that's the case, you'll just have to wait for the lease to expire.6. Sell the property to your tenant
When you decide to sell your property, make sure your tenant is one of the first to know. If they've loved their experience there (and have built a life centered in the neighborhood with friends, family, and a career in close proximity), they might jump at the chance to purchase the house.You likely know the character and reliability of your tenant up to this point. If they are serious about purchasing the house, you may be able to expedite the selling process and skip past all the other listings and showings and even avoid some selling costs.7. 721 exchange your property into an existing portfolio
Exchange your property for shares in a portfolio that's interested in purchasing your property. Not every fund or REIT will buy a property with a tenant contract, but Flock will.Flock honors the lease until it expires, and then we'll work with the tenant(s) on the renewal process. You, on the other hand, get shares in our portfolio of homes which provide access to quarterly cash flow, home price appreciation, and none of the hassles of traditional ownership. It’s a way to sell your house, but stay in the real estate investing game.Join Flock With or Without a Tenant
Ready to retire from being a landlord? Join Flock. We'll take your property regardless if it's vacant or tenant-occupied.Want to see if your rental property is the right fit for our portfolio? Enter your property's address, and we'll reach out in the next 24 hours with a free, no-obligation valuation.Landlords, retire and minimize taxes.
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