When thinking of purchasing a new home, most envision the process to look like a string of vacant, staged, turnkey properties. But what happens when you are a seller with a tenant in your property?
You’ve heard us preach it time and time again, optimizing your sale through proper preparation makes all the difference when presenting your home to prospective buyers. In an ideal world, the home is vacant, clean, freshly painted and staged to perfection!
But what about selling that condo you invested in 3 years ago, or the duplex that has been in your portfolio for the last decade… In most cases these properties would be tenanted. While your goal is to sell the property for the highest value possible, those tenants have their own set of objectives. While requesting them to vacate may sound simple enough, it is easier said than done. It is important to have an open discussion with those tenants to align your objectives and create a win-win scenario for both parties.
How a tenant can impact the sales process.
When a buyer walks into the home, we as listing agents want them to imagine themselves in that space, enjoying their day to day lives. This is where the importance of staging applies. Removing personal items and clutter, while creating an aspirational, yet realistic space for them to envision their family. Humans tend to make decisions with emotion before logic. While they will need to crunch their numbers and look over the schools in the area, first they need to build an emotional attachment.
Why is this relevant when speaking about tenants? Unfortunately not all tenants are excited to be a part of your sale. Not all tenants live in a tidy manner, and many work from home and don’t want showings in and out of their space all day. These are a couple of the many factors that can lead to a challenging sale when dealing with tenants. The main concerns that sellers run into are tenants being extremely restrictive with showing times, denying showing requests, leaving the space in disarray, and remaining in the space while showings are taking place.
How to create the win-win.
As landlords ourselves, we at Abode have dealt with these scenarios in our own sales, as well as managing them for our clients. Being open and considering your tenants position and feelings around the situation are key to moving forward productively.
While we are happy to manage the process with your tenants, this can be a big deal to them and they can feel vulnerable as they may lose the place that they call home. For this reason, I always recommend making a personal phone call to them for the initial conversation. This conversation can simply be to notify them that you are planning to sell, expressing that you will do your best to make it as smooth and non intrusive to them as you can, and that your realtor will be reaching out to coordinate and discuss further. While this may seem like a small an insignificant step, it shows that you care and you are not looking to blindside them with the sale. This alone can make a big difference in their receptance to your future requests regarding the sale process.
So you’ve told them your’e selling… now what.
When dealing with tenants there is one VERY important thing to remember, in Ontario especially, your Tenant has more rights than you do. It is important to check your ego and be careful how you communicate with them and approach any negotiations.
As a landlord, you cannot simply tell someone to leave your property. Legally speaking, as a landlord, unless you are a direct family member are moving into the premises, you cannot force your Tenant to vacate before or while your property is on the market.
A tenant can only be “forced” to leave after a sale has been successfully negotiated and firmed up. The purchaser will need to swear on an affidavit that they are end-users, meaning they will move into the premises as principal residents. If the purchasers are investors, the Tenant will be legally allowed to remain, and the buyers will assume the existing Tenant and their current rental rate.
Ultimately this leaves two options; Sell with the tenant to be assumed by the new owner, or negotiate with the tenant to leave on their own accord.
Negotiating with a Tenant to vacate needs to be handled with care and respect. These are some of the most common strategies:
Speak with the tenant to see if they were intending to stay or had been considering a move anyways – it may not be common, but sometimes they were already considering leaving and you can simply be that final nudge for them to do so.
Offer cash for keys. Offer to compensate the tenant and additional 1-2 months rent and or covering moving expenses, and or referring them to a leasing agent to find a new property with a glowing reference letter in hand ( this strategy is often the solution the will do the trick)
If that approach doesn’t work and you feel that investing in removing this tenant is going to greatly impact the sale, you can try negotiating a higher figure to entice them to leave. If you feel that you can get $100k more for your sale if it is prepared properly without a tenant, it may be worth offering them $30k to vacate the property, decide what makes the most sense for your sale.
If they simply love where they live and will not leave, have the conversation with them that showing as a good tenant = more likelihood of a new buyer keeping them as tenants. Encouraging them to care for the space and work with the showing requests, in order to show themselves as a tenant that an investor would be happy to assume, therefore increasing their likelihood of keeping their current place of residence!
If you want to know more about the process of selling with a tenant, or are looking for an agent that is familiar with the process to help you move forward, reach out! We are here to support you in a successful sale.