A homeowner or landlord deciding to sell is a major event. The sales process is the same, even if you are just unloading an unwanted rental property. That already complex real estate transaction process is made trickier if you are trying to sell a house with a tenant.
Questions like “How does your lease agreement play into a sale,” or “Will a tenant living on the property negatively affect potential buyers” are considerations you and your real estate agent must address.
Not doing so and hoping for the best, maybe a quick eviction or your tenant being willing to move immediately, is unrealistic.
Here are some things to consider, as well as how to address selling a house with a tenant so you get what you want.
Additionally, if you are considering selling, we buy houses San Antonio residents love.
Sell House with Tenant
Technically, you can sell your home with a tenant residing in it. There are, though, a few factors that might influence how you sell your home if you have tenants.
Informing Tenant of Your Desire To Sell
If your lease agreement is month-to-month, you only have to give 30 days’ notice. If you go that route, you still must adhere to the legal process regarding terminating the tenancy, mailing advance notices, timeframes, and deposits.
Ideally, you can work something out with your tenants to have them move at a set point that does not leave you with months without rent or your tenants without housing.
In Texas, tenants have rights regarding eviction, and an eviction always extends the time the tenant can stay at the property, so it is in your best interest to work something out.
A downside to terminating a month-to-month lease is losing some rental income. If your house takes a long time to sell, the loss of income can be steep. A selling point to keeping tenants and working with them is keeping the revenue coming in.
A fixed-term lease complicates the process in that there are specific timeframes and procedures in the tenant’s lease you must observe (early termination clause, security deposit, etc.) You have a few options, however, that make the process smoother.
Wait Out the Lease
There are multiple reasons why waiting to put your house on the real estate market until your current tenants’ lease has run out is a good idea.
For one, the end of the lease means you avoid dealing with possibly angry tenants with whom you are terminating the rental agreement.
Terminating a lease early throws their life into chaos, and that can make your selling process more difficult. Waiting out the lease makes the process of informing the tenants of your desire to sell easier.
Letting a tenant-occupied property know you are putting the house on the market entails giving your tenants the proper notifications to vacate, usually spelled out in your lease.
Proper notification per the lease creates an organized schedule for you and your tenant, leading to a smoother sales process. You must work out details like how to show the home to prospective buyers.
Another reason is that if you want to make capital improvements, doing so is much easier without the hassle of working around tenants. Holding open houses is much more difficult with people living in the home, but with notice, your renters leave, and you can do what you need to do.
You can also give your existing tenants incentives to vacate early but still give them time to get organized and move.
Can You Sell a House with a Tenant in It?
Regardless of what approach you take, the outcome that works best for everyone is a negotiated departure.
You may even be able to work out a lease extension with the new buyer if they are looking to keep the property rented. It is always cheaper and easier to let settled tenants stay than to redo the inside of the property and find new tenants.
If your tenants are reluctant to terminate the lease early, you might have to get creative. Offering them incentives to terminate early can ensure you get what you want. Some incentives are:
- Returning a security deposit, even if it is not warranted
- Buying the existing tenants a gift card for their new place
- Letting them live rent-free for the last month
- Paying their moving costs
Any of these might make it worth your tenants’ while to terminate the lease early. A couple might seem excessive, but think briefly about what you are doing to your tenants by selling the property.
Can You Sell the House to Your Tenant?
Another option that has a few different alternative ways of doing them is to sell the property to the tenant. This works best with single-family homes. There are several benefits to this approach:
- No eviction
- No sales processes
- Streamlined negotiations
- No real estate commissions
How you structure the deal is up to you. A flat-out sale using a mortgage lender might require hiring a real estate lawyer that knows the process.
If you are not looking to reinvest quickly, you could explore rent-to-own options. Rent-to-own works well if you have a good relationship with the tenants and they love the property.
Landlords Rights When Selling a House with a Tenant Attached
Part of a landlord’s rights when selling a house with a tenant attached is the right to evict if your tenant has given you cause.
If our tenant has violated their lease, you have reason to ask them to leave. You also do not have to follow the terms of your lease because they have violated it.
You do have to follow state law, however.
Reasons you can terminate a lease and push to remove a tenant include, but are not limited to:
- Damaging property
- Causing a disturbance
- Not paying rent
- Subleasing (when it is prohibited)
- Providing false information on the lease or rental application
- Participating in illegal activities on the property
The key with an eviction is to remember that local laws and state statutes likely do not let you give the tenants hours’ notice to vacate or even days.
Additionally, if the tenants fight eviction, you could end up in court. Think long and hard before pursuing an eviction. You might want to go the incentive-to-leave route before doing anything draconian.
The downside to removing your tenants is three-fold:
- Risk breaking the law
- Length of time it takes to work through the courts
- The court process itself
Every state has landlord-tenant laws, and some are more favorable to landlords, while others provide great leniency to tenants. Whether to go to court may be a decision based on where you live.
Depending on the laws, you might have to follow a lengthy and strict process to evict. If you violate the law or mess up during the process, you might have to start again. If your tenant fights the eviction, you could end up in court for months.
If you move to evict, you should consult a real estate attorney first, and even let them handle the eviction. Not only will they ensure that you follow the law, but if you end up in court, it is much easier to let an attorney handle the court processes than to take it on yourself.
How To Sell a House with a Tenant
The cost to sell a house can be steep for the property owner, especially if it is a rental home with active tenants. One option is to sell the home to a real estate investor.
You can go the traditional route of selling to a property management company, or you can consider alternatives like cash home buyers in Texas.
Either type of investor will buy a house with tenants because it is an advantage to have tenants in a home rather than having to go through the process of finding new tenants.
Additionally, depending on the real estate market, you might be able to negotiate a better sale price because of a quick, painless sale.
Selling your house as an investment property is a good idea if you are selling a property without a realtor. It is also a great option if you are looking to sell a house fast in Texas.
By selling to a property investment company, you avoid having to provide your tenants with written notice or worrying about lease termination processes or tenants’ rights.
The downside to this approach is that your list of prospective buyers is limited. There may not be any real estate investment companies interested in buying where you are.
Selling A Home With Tenants Can Work
Most consider the prospect of selling a home with a tenant problematic, but it does not have to be that way. The seller has multiple options, including helping the existing tenants work something out with the new owners.
The keys to a successful home sale, when you have a tenant are to be flexible, willing to compromise to make it work, and to consider alternative sales methods.