Selling a home with tenants: Challenges & solutions
Selling a home with tenants can be challenging, but with the right strategies - like clear communication, legal compliance and timing the sale strategically - you can navigate the process smoothly and successfully.Selling a home that is currently occupied by tenants can be a complex process. While it is entirely possible to sell a tenanted property, landlords must navigate legal, financial and interpersonal challenges.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, one of the biggest challenges is the existing lease agreement. “If the tenants have a fixed-term lease, the new buyer must honour that lease until it expires or the tenant decides to move out. This can limit the pool of potential buyers to investors rather than owner-occupiers,” he notes.
Goslett adds that it is possible for a buyer to stipulate that the property must be vacant before the transfer can proceed. In this case, if the homeowner accepts the offer, it will be their responsibility to ensure that the tenant vacates before the sale can be finalised. The homeowner needs to consider carefully what is stipulated in the lease agreement regarding early cancellation and cannot act unlawfully to evict the tenants early.
Be honest
To avoid these kinds of complications, if possible, Goslett encourages sellers to consider listing the property when the lease is about to expire. “If the sale cannot wait, then have an honest conversation with your tenant and offer incentives such as a reduced rental rate, moving assistance, or financial compensation for their cooperation to end the lease early,” he suggests.
The next hurdle is to arrange showings, inspections, and valuations, which can be disruptive for tenants. If they are uncooperative, it can be difficult to present the property in the best light. “As challenging as it may be to work around a tenant’s schedule, it is vital to respect their rights to avoid complicated legal issues. Keeping tenants informed about the sale process can also help ensure their cooperation. Working through a rental agent can alleviate some of the stress and give the homeowner one less thing to have to worry about,” Goslett advises.
On the other hand, marketing a property solely to real estate investors who are looking for rental income can be a practical solution. “Investors may see value in purchasing a property with an existing, stable tenant. In the listing description, highlight that the property comes with a reliable, long-standing tenant,” says Goslett.
“Whether selling to an investor or waiting for the lease to expire, the key is to balance the needs of both the tenant and the buyer to ensure a seamless transaction. Enlisting the help of a reliable real estate professional can make the whole process run a lot smoother,” Goslett concludes.