Selling a property is usually a stressful enough time in someone’s life, but when you’re selling a tenant’s home it can be even more difficult.
While many agents prefer to sell a property with vacant possession, without a tenant, some renters can benefit your sales campaign, Xenia Ioannou, principal of Alexa Property Group said.
‘Some tenants are an asset – their furniture is beautiful, their decor matches the property and the prospective buyer has a feel for what the home would be like with their own furniture,’ Ioannou said.
It also means a landlord isn’t holding a property without any rental income.
However, the opposite can also be true – messy tenants who are unco-operative can make selling a home tricky, she said.
Communicating with tenants
Most tenants will be understanding when it comes to selling time, but the most crucial thing for property managers is to ensure they keep the tenants in the loop about what is happening.
‘Ethically, the tenant should be the first to know. The agent needs to organise inspections with them. It works to give them predictable dates and advanced notice,’ Ioannou said.
In all states and territories, real estate agents and landlords are allowed to sell the property and host inspections with prospective buyers, provided the tenants are given the correct notice periods.
Sending a letter to the tenant advising them of the landlord’s rights around inspections and selling the property can help avoid problems upfront.
‘It’s about working with the tenant, rather than fighting with them,’ she said.
‘One property we sold was a million dollar property and the tenants had a junk food habit,’ she said.
The home had soft drink cans, takeaway packets and rubbish over the bench tops whenever they visited. The carpets were also dirty.
Tenants are required to keep the property reasonably clean during the inspections. However sometimes an alternative approach can work.
‘We paid to have the carpets steam cleaned at our expense and gave them the incentive of a box of Krispy Kremes at the end of the [sales process] if they kept the property clean,’ she said.
A box of doughnuts set them back $50 and proved a good enough incentive to get them to keep the place clean.
Movie tickets and even reduced rent in some instances can help.
Usually, it is the sales agent who will speak to the tenant and negotiate with them. For those who have chosen their property management agency to also sell the property, this can make things easier as the tenant will be familiar with the agency, she said.
Location, location, location
Selling with a tenant in the home also depends on the location and the expectation of likely future buyers.
Ray White Kellyville’s Sanjeev Kumar said western Sydney suburbs and other investor heartland locations, such as postcode 2770, had a lot of renovator and investor buyers who wouldn’t be too concerned about a tenant being in the property already.
Some would be keen to keep a good tenant in the property to ensure no vacancies from day one, provided their rent is kept at a competitive market level.
When a home is sold, the lease is automatically transferred to the new owner.
‘But in the Hills [District] a lot of buyers are owner occupiers and if they have to wait eight months to move in, there’s a chance they’ll buy something else,’ he said.
‘If they’re on a month-to-month lease and they’re not accommodative it can be better to let the tenant go.’
In a fixed lease situation, it can be worth considering delaying the sale until close to the end of the lease. With settlement factored in, many landlords will wait until the lease has three months left before putting the home on the market.
‘A tenancy agreement overrides a sale, so we try to sell properties within the last three months of a tenancy agreement. If the buyer wants to renew the lease, they can,’ Ioannou said.
States and territories across Australia differ around the legalities of selling while a tenant is in the home.
Tenancy laws dictate how much notice must be given before a showing, the hours a showing can be held and the maximum showings that can be held in a period of time. Usually, tenants are allowed to refuse an open home.
In some states and territories, such as Queensland and NSW, an on-site auction cannot be held at a house without the tenant’s consent.
Laws also vary around photographing a rental home for sale and the use of signboards out the front of the home.
The Tenants NSW fact sheet said tenants may ask for a rent reduction, but it is not a requirement that landlords agree.