Before putting your tenant-occupied property on the market, it is important to understand the type of lease agreement you have with them. This will determine your legal options for selling. If you decide to list your home on the market before your tenant’s lease is up, you might consider negotiating a monetary settlement with your tenant in exchange for them to vacate your home before the lease is up. This is commonly referred to as “cash for keys.” This strategy is effective, but can also be costly. Take a look at some of the options owners have when dealing with a tenant-occupied property with a fixed lease.
Offer Cash-For-Keys
When deciding how much to offer you tenant, consider these options:
· Cover their moving costs
· Pay the security deposit and first month’s rent for your tenant’s new home.
· Pay the difference in rent costs. If rent for comparable properties is higher than what you’ve been charging, offer to pay the difference between what our tenant will likely have to pay and what they have been paying you, times the amount of months left on the lease.
Remember your tenant is under no obligation to accept your offer or agree to move out before the lease is over. When approaching tenants, it is always best to be respectful and upfront about your intentions.
If your tenant loves their home, they might be interested in purchasing the property. Here are a few common ways you can sell the property to your tenant:
- A lease-to-own with a one-time, non-refundable option fee that allows tenants the right to purchase the home within the year, at a set price. In the meantime, they keep paying rent.
- A lease-to-own agreement that is structured so a portion of the rent goes toward a down payment.
- A seller-finance agreement. You, as the property owner, serve as the lender, instead of a bank. The tenant agrees to make payments to you over a period of a few years, often with one balloon payment. The biggest benefit for the seller is the money you’ll make in interest on the debt. In order to take advantage of this type of sale, you’ll need to own the home free and clear, without a mortgage.
Selling The Active Lease
If you plan on completing the sale before your tenant’s lease is up, the state of Illinois requires the buyer to honor the existing contract through the remainder of the lease. Selling to an investor is the easiest way to ensure your buyer is willing to be the new landlord. Having existing tenants in a commercial or multi-family property is actually a good selling point since the potential buyers do not have to search for tenants after they purchase the home.
TIPS FOR A SMOOTH SALE WITH TENANTS
Selling with tenants can be a challenge, but communicating openly and respectfully with your tenants will make the selling process easier. Here are some tips to keep in mind when selling your tenant-occupied property.
- Be Upfront About Selling - Meet with your tenants about your intentions to sell the home. Keep the lines of communication open so they know what to expect.
- Do Not Put Signage In The Yard Alerting Neighbors Or The General Public - A sign could be seen as an opportunity for a passerby to knock on the door and request a showing. Let your tenants know if someone asks to see the home, they should never let them in. Instead, they should refer them directly to the listing agent for safety and best practices.
- Schedule Showings As Conveniently As Possible - Ask your tenants their preferred days and times, and try your best to adhere to those time frames. Give your tenants at least 24 to 48 hour notice before a showing. This demonstrates you respect their time and space. It’s also important to ask your tenants to leave while the showing takes place. To encourage your tenants to be more cooperative, consider providing an incentive. If you have to show the house on a Saturday morning, give them a gift card to a local coffee shop or restaurant so they can enjoy themselves while you show the home.
- Communicate After The Sale - After closing on the property, send a message informing your tenants of the sale and the information they’ll need to direct their next rent payment to the new landlord.
Selling your tenant-occupied property can be tricky, so it is important to know your options and best practices. Give us a call - we would be happy to help!
If you need help, have any questions, or are interested in learning from the best property management company in Chicago, don’t hesitate to reach out! You can contact us at Landmark Property Management via phone at 312-313-8553 or send us an email at office@landmarkrgc.com.
