Can You Sell A Tenant-Occupied Property - Article Banner

Many landlords consider selling their tenant-occupied unit at a certain point if they are tired of their rental responsibilities as a Berkeley landlord or want to take advantage of the seller’s market. 

The question is, can you? The short answer is – yes. You can sell a tenant-occupied property. 

However, it is essential to ensure that the selling process does not become a hassle to your current tenants so that they consider moving out of the place.

To provide more insight into the process, our expert property managers at California Pacific Realty have put together a comprehensive guide on selling a tenant-occupied unit for Berkeley homeowners and landlords. 

First things first.

Can you sell a tenant-occupied property?

This question often pops up in landlords’ or owners’ minds when they are tired of bad tenants or if they want to benefit from a great market opportunity. In any case, you can sell a unit with renters still living in it. However, in most states, the government offers several rights to tenants to protect themselves against liabilities. You must understand all these rules before deciding about your rental home.

Key things to consider while selling a renter-occupied unit

You should consider several factors before selling your renter-occupied property in Berkeley. Here are a few:

1. Review the lease agreement

You can check the lease agreement with tenants to see if there is any provision regarding the sale of your Berkeley rental house. Usually, leases include clauses that allow the landlord to sell the property. However, in some cases, other leases may require the landlord to give the renters a prior notice or even the opportunity to purchase a home for themselves.

2. Understand tenants’ rights

As mentioned above, tenants have the right to quiet enjoyment of the property, which landlords must refrain from unduly disrupting by the sale process. You should respect your tenants’ privacy and avoid showing the property to other potential buyers without permission or unless they are home.

Advantages and disadvantages of selling a tenant-occupied property

Selling a tenant-occupied house has its own benefits and drawbacks. You must also consider several factors, such as:

1. Types of property

If you own a complex with many tenants, or if you have an investment in a good location like a university town, you may attract a larger pool of potential buyers who won’t mind a current tenant. You should also consider the market price for your property as most people plan to purchase high-priced properties to live in them and not to make money by renting them. Additionally, you should consider that different investors may expect specific properties to have better ROI than others, so you should think from their perspective and do the calculations accordingly.

2. The term of the tenancy

If your tenant is renting monthly, ending the tenancy only requires the amount of notice as specified by the law. However, if your house is in a rent-controlled area, research the different residential laws concerning the buyer ending the lease or rental agreement. You can check the lease agreement to see how much time remains on the lease, or it would be appropriate to terminate the tenancy before closing. Usually, residential real estate investors tend to have long-term tenants, while homebuyers often move into the unit immediately. 

3. The pool of potential buyers

Many investors pick up a house with an existing tenant who pays rent regularly and has a comprehensive lease or rental agreement. If the tenant’s lease expires a short while after the sale closes, the property may appeal to potential buyers who want to reside in the property but cannot move in immediately or wait until they can move in. However, if you have a single-family home that a new buyer wants to purchase and move in quickly, having a tenant will probably lose your potential buyers.

4. Tenant characteristics 

Tenants who communicate well and keep the home clean inside and out are assets during the selling process. Conversely, any tenant that is disrespectful, messy and uncooperative may hurt your chances when it’s time to sell.

How to sell a tenant-occupied property?

Here is the step-by-step process you need to follow while selling a tenant-occupied property.

1. Provide the tenant with a notice

Tenant communication is crucial during the selling process. You may want to avoid surprising your tenants by putting a For Sale sign board on the front lawn one day. Your tenants deserve to know that you are considering selling a property they live in. You can send a letter to your tenants notifying them of the intent to list your home for sale. 

You should provide details in the letter, such as a timeline of what will happen or when the home gets officially listed on the market. If your tenants help sell your property and are ready to cooperate by vacating the unit during showings, you can offer a discount on rent while the home is on the market.

2. Protect your tenants’ rights

While landlords have the right to sell their occupied rental property, tenants also have the right to protect themselves in any circumstances. Your tenants can stay in the property until the end of the lease term. If the lease has six to seven months left on the lease, it may inhibit your ability to sell the property immediately. You can negotiate with your tenants if you want them to leave early and sell a vacant home by protecting their rights.

Marketing considerations while selling a tenant-occupied property

Several factors, like the property’s layout and size, and whether the renters will stay on post-sale, influence how to advertise the property. Those not seeking immediate possession won’t care if a renter is still residing. However, other interested parties may think differently. If you sell a tenant-occupied property, having a happy and cooperative tenant can make the marketing process much more manageable. 

You can consider the following things while marketing a rental home with tenants. 

1. Schedule showings according to the tenants’ convenience 

As a responsible landlord, you must inform the agent to notify your tenant within a specified time before showing a property. If your tenants ask you to avoid showing up at a specific time, consider respecting their privacy and follow their requests.

2. Politely ask the tenant for some privacy during showings 

No buyer or investor likes to be shadowed by a tenant, especially one who doesn’t want to leave the unit. Additionally, the buyer should be able to visit the property freely. You can request your tenant to leave the property temporarily during a showing or offer the renter a gift card to a nearby coffee shop so they can spend time away from the house doing something they like.

3. Offer assistance with rental maintenance 

Another tenant-appealing idea is to hire a cleaning service or lawn care for renters while the property is still on the market. Since a resident doesn’t have a role in the selling process, it’s vital that you, the seller, take some responsibility for maintaining the property and preparing it for showing. 

Dealing with Tenants Who Don’t Want To Go

There are a few ways you can consider for your tenant if they feel attached to the property:

1. Sell your home to your tenant

If your tenant doesn’t want to leave, you can always ask if they want to purchase it. They may be an ideal buyer since they know the home well and have already moved in. You can suggest several options like seller financing to your tenant if they can’t obtain a mortgage. 

2. Pay your tenant to leave

If you need to sell your property as quickly as possible, you can pay your tenant and ask them to vacate. It includes paying for the cost of movers, paying for a month’s rent in their new space, or paying their security deposit for their new apartment.

3. Sell to an investor

Finding an investor can be challenging, but if you find someone ready to purchase the property while your tenant’s lease is still active, it can be a great solution. Note that the investor must allow the tenant to remain in the home until their lease expires. However, the security deposit and fixed-term lease are transferred with the property when sold, making the investor the new landlord.  

Sell PropertyIf you’re selling a tenant-occupied property in Berkeley, you’ll want to be sure you consider everything, as your tenants can make selling either super easy or a nightmare for you. The best way to do this is by hiring professional property managers like California Pacific Realty, who can assist at every step of your home-selling process. 

For more information on selling a tenant-occupied unit, contact us at California Pacific Realty.