Can You Sell an Occupied House with Tenants?

Selling a Tenant-Occupied Home: A Comprehensive Guide

If you’ve owned rental property in Seattle, WA for any length of time, you probably already know Washington is a very tenant-friendly state. Selling a rental property can be a complex process for any Seattle investor, but it can be even more challenging when there are already tenants occupying the property. When you need to sell, whether it’s to free up cash, handle a probate, 1031 Exchange into something better, or even to get rid of a bad tenant (!), it’s good to know what your options are.

As a landlord, you have the responsibility to ensure that your tenants’ rights are protected, while also planning for the sale of your investment house, duplex, triplex, etc.

Remember, while it is your property, it is also someone’s home. If you’ve never sold an occupied house with tenants before, I have detailed below how to notify your tenants, prepare your property for sale, and close the deal. 

If you’d like to download our nicely formatted PDF with all the details, be sure to fill out the form below.

Part 1: Deciding What To Do With Your Tenants, When Selling Your Rental Property

The first decision you need to make when deciding to sell your rental property is figuring out what to do with your tenants. You can sell while they still live in the property. You can wait til they leave on their own, or you can ask them to leave – and kick them out – so you can get the place sold for top dollar.

Ways To Sell Your Rental House

Is It Hard to Sell a Rental Property with Tenants?

Yes! Selling a rental property with tenants comes with challenges, primarily concerning tenant cooperation, property condition, and legal obligations. If your tenants don’t want to move, they may make it very difficult for you to show the property, or even gain access to the property. They may be afraid the new owner will evict them or raise their rents (both valid concerns) and can sometimes attempt to “tank” the sale.

Even if a tenant is not acrimonious, just the hassle of keeping the home clean and show-ready may be too much for them. Like all of us, some tenants are slovenly.

A Story From The Trenches: Why Having Tenants In The Property Can Create Problems.

I recently sold a condo in Everett, WA where the people living there were working the night shift at Boeing. It was hard to find a good time to show the property since they were sleeping their during the day. They came home every day and smoked pot (we could smell it) and left their bongs out, they slept on air mattresses which were in the living room as well as the bedroom and left unmade, and when we came to visit the property, they had put blankets over the windows to make it dark for their sleeping, so it was creepy inside the home.

This particular home was headed to foreclosure, and was not a tenant-occupied home, but the concept is similar – when there’s an unmotivated person living in the home, getting a great showing and a great first impression is tough. Fortunately, my buyer was investment-minded, and the listing agent did some repairs to the home as part of the sale, so we stuck with it and put the deal together, but it was not an easy situation for the faint-of-heart home buyer to have to deal with.

Addressing these challenges upfront can streamline the sales process.

What are the Tenant’s Rights When the Landlord Sells the Property?

Tenants have rights to peacefully enjoy their home.  When a landlord decides to sell, this can be stressful and unsettling for them.. Understanding these rights is crucial to ensure compliance and avoid legal issues during the sale.

If You Want To Sell The Property While The Tenants Are Still In It…

Just because you are marketing a property with a tenant still in it, it doesn’t mean the tenants have to give you and your potential buyers unlimited access to come look at their home. They have a right to peacefully occupy the home without constant interruptions.

Let’s look at some different ways to try to make this process as smooth as possible for both your potential buyers and your current tenants.

1) Keep The Tenants In Place and List The Home With An Agent

Limited Access/No Showings Before Purchase & Sale Contract Is Signed

With this solution, I as a real estate agent, can simply list your home for sale on the market, as we would any property, but we would mention in the listing that the home is tenant-occupied and potential buyers will not have the opportunity to tour the home until after they have made an offer to purchase.

Many landlords sell a tenant-occupied home by listing it with an investor-friendly real estate agent who can market it via the local NW Multiple Listing Service. Here we can put the property in front of thousands of potential buyers and have more chances to find an investor-buyer who is willing to take on your tenants – either keeping them, or handling the eviction if necessary.

Typically in this scenario, the landlord would offer photos of the property (ideally recent photos, but photos from your last rental ads – when the property was vacant can also work). And NO SHOWINGS of the home would be allowed until the buyer had submitted an offer and had it be accepted. Then, the property would be shown as part of an inspection and verification process.

The danger of handling the sale this way is that if the problems with the property condition are not accurately communicated prior to the contract, the buyer may be disappointed in condition he finds the property and plan to heavily re-negotiate.

This risk can be mitigated by the seller providing accurate pictures of the home, a realistic description of any defects or flaws in the home, and provision of maintenance records and costs associated with upkeep of the home and any recent improvements. The seller can even have a professional home inspector come look at the home from top-to-bottom, and then provide his written report to potential buyers.

If you are trying to fly under the radar, this can be a challenge to get in and take a lot of pictures and start doing an inspection. Some landlords say this is for their insurance company’s records. Some disclose the potential sale. Some do it while the tenant is at work. Obviously, you do have to let your tenants know when you’re coming into their space. If you are the type of landlord who does an annual home inspection anyway, you may be able to do this without the tenant having any concerns at all.

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2) Keep The Tenants and Sell Directly To A Cash Home Buyer

Sell As-Is Directly to a “We Buy Houses” Cash Home Buyer

If you’re looking to sell your Seattle property quickly and don’t want to deal with the hassle of listing the property or waiting for the lease to end, you could consider selling directly to a cash home buyer.

Cash home buyers are investors who specialize in buying properties quickly and can offer you a cash payment for your property. This can be an attractive option for landlords who are selling a home quickly and don’t want to deal with the hassle of listing the property or working with tenants.

However, it’s important to keep in mind that you may not get the same price for your property when selling to a cash home buyer as you would if you listed it on the open market. Typically, they offer speed and convenience but not top-of-the-market pricing. Cash home buyers may pay less, but by purchasing as-is, you can save money on commissions, repairs, and holding costs.  They specialize in solving problems and buying properties that are in distress or having difficult circumstances.

3) Keep The Tenants And Show The Property – Paying The Tenants To Cooperate With Showings

A few years ago I had a number of investor-buyer clients who were interested in getting their first rental properties in Seattle.

Several of these buyers were looking at buying Air-BnB properties because of the increased rental for cashflow. I found a GREAT property in Capitol Hill that had a 10-cap and showed it to a couple of my clients. Interestingly, the property was tenant-occupied with short-term tenants and a cat and every time we wanted to show it, the tenants had to leave.
However, they kept the home in great condition and left happily for any showings, because – the property manager revealed to me – she gave them $50 each time. So they were happy to do it.

Here are a few other scenarios that might happen to you. If you want to sell, the typical bad news of a tenant breaking his lease and leaving early, could be good news for you.

Also, if you’re looking to sell the property and the tenant wants to buy it, you may save yourself some time and trouble. I have helped facilitate this type of transaction before it worked great for both the buyer and seller.

4) Sell Without The Tenants – Paying The Tenants To Leave Early

One way to get around the problem of tenants staying in the property when you want to sell, is to make an agreement with the tenant asking them to leave the property early  in exchange for vacating it so you can proceed with the sale of the property.  This will help you maximize the value of the property when you list it and getting the tenant out of your investment property will help you keep the property clean and nice so you can market the property effectively.

Many more buyers will be interested in the home once it’s vacant. It may be worth several thousand dollars for you to fast-track the tenants existing the property.  

On my rentals, I typically charge the tenants 2-months rent as a lease-break fee, so you may need to offer them something similar in exchange for the tenant moving out. In addition, they will need enough time to find a new place and get their items moved.  If the tenant is month-to-month and feels they could be asked to leave anyway, this could be a win-win situation. 

However, this may not be a good strategy depending on the type of property.  If your house with a tenant in it is in rough condition, the kind only a landlord would want to buy, removing the tenants may not add value.  An occupied property generating rent from day one could be preferable from the new buyer’s perspective, especially if it’s a good tenant with a good lease and the new buyer would be walking into a profitable and easy property management situation.

5) Wait Til Tenants Leave – Show Without Tenants

When The Tenant Wants To Break Their Lease, or Leave

If the tenant WANTS to leave – maybe they are trying to break their lease early and that’s why you’re selling, or maybe you chat with them and they are happy to move… this is one of the best situations in which you could be selling a tenant-occupied property, because the tenant will feel like your partner and you’ll have the shared goal of getting the property sold.

Rather than being opposing parties, you’ll be on the same team. The tenant will receive a benefit of an easy-exit from the home

6) When The Tenant Wants To Buy The Property

About 2-years ago, I was giving a first-time-home-buyer seminar, and I met a beautiful multi-generational family living in a rental house in Renton, WA. The market was going strong and the landlord wanted to sell, and they wanted to become home owners. The landlord had his own agent representing him and helping him with pricing, and the tenants asked me to represent their side. I helped them get an inspection, and they took a government sponsored downpayment assistance class so they were able to combine their incomes and qualify for the loan without having saved up much cash.

If your tenants have a good income and are interested in buying your property, put them in touch with the Washington State Housing Finance Commission and inquire about down payment assistance for them. This is something I am in the process of getting certified to offer directly, as well, so let me know if you have any questions in that regard.

It’s also crucial to be ready to address any inquiries or apprehensions your tenants might have regarding the sales process. They could be concerned about their security deposit, lease terms, or future accommodation plans. Swiftly and honestly attending to these issues is vital for nurturing a positive rapport with your tenants.

If the tenants have a lease in place, you’ll need to refer to your lease. Are there any provisions for the landlord to break the lease? Typical leases run for a specific term, like 1 year or month-to-month. You’ll want to look at your lease to see if you, as the landlord have a tenant buy-out clause or not. If you’re renting a property you’re thinking about selling soon, this may be an option you want to include in the future at your next lease or renewal.

7) Evict Your Tenants (Or End Their Tenancy) Prior To Selling

Here in Seattle, you can’t just “end a tenancy” at the end of the lease – oh no, that would be too easy! There has to be “just cause” to end the tenancy, such as poor performance by the tenants, drug use, or a variety of other reasons. Don’t worry – we are in luck because wanting to sell the house is a valid reason, or “just cause” to end a tenancy with a tenant. Another valid reason is if you or a family member are planning to move into the property.

Notify Your Tenants

When preparing to sell a rental property with tenants in place, and you want them to leave before you put it on the market, the first step is to inform the tenants of your decision to sell.

Tenants typically require 90-days notice that you are going to end the tenancy for just cause, though you may be able to petition the courts to allow 60 days if you are experiencing undue hardship.

The property notice involves providing a formal written notice to the tenants, indicating the planned listing date and when potential buyers may view the property. I like to mail a snail-mail letter, mail a certified letter and tape a notice to their door (and take a picture of it).

Keep A Record

For everything you do in this legal procedure, create a paper trail and provide proof, in case the tenant doesn’t move out and you end up in court trying to prove your case. You want to be able to show that you provided adequate notice to your tenant, so the judge doesn’t argue that you missed a step and you have to start the timeline over again, after months have gone by and the tenant has not moved out as requested.

Consider Using an Attorney

Because eviction can be an expensive and time-consuming process, consider using a flat fee eviction attorney in Seattle to help you with this process. They will be familiar with landlord tenant law, and when/how things need to be done so that they stand up in court.

If your tenant is giving you any type of pushback, non-payment, or creating other difficulties, this is extremely important. Some tenants just stay in the house and milk the system for all its worth. I have had to appear in small claims court to evict tenants before, and it’s much better to come with your stack of evidence prepared so it will be obvious to the judge that you’ve treated the tenant fairly, and it’s time for them to go.

Keep It Friendly, If You Can

However, most Seattle Tenants are not unreasonable people. Espeically if they’ve been paying on time and love the house, they will probably be disappointed that you are asking them to leave. It’s hard to find a new place to live and rent is expensive, so make sure you give them adequate time to find a new place. (But there does have to be an end date, so that’s why you need to serve formal notice and not just rely on the goodness of their heart. )

Notify The City Of Your Intent To Sell

Also, here in Seattle, as of 2019, there is a Notice To Sell ordinance that applies to multi-family units (but not single family homes). If you are selling a duplex (with two units) or other multi-family building, you need to notify the city. Yes.. more red tape.

SECTION 2: How To Prepare Your Rental Property For Sale

If you want to sell your property with the tenants in place, there may not be much you have to do to get the property ready. Most likely you’ll be selling to an investor who knows how to get repairs done and will anticipate buying at a price that’s low enough that he will still have a profit after doing all the fix-up work (if any) the property may need.

Sell to an Investor or List With An Agent?

Another option available to you is to sell the property directly to a Seattle real estate investor. Cash investors are often interested in purchasing rental properties because they are already generating income and have established tenants in place. They may also be willing to pay a fair price for the property because they see the potential for future income.

If you choose to sell to an investor, you should first consult with a real estate agent to find a qualified investor who is interested in purchasing the property. You should also have the property appraised to determine its value and negotiate a fair price with the investor.

I am both an investor and a real estate agent. If you choose to work with me as an agent, I will NOT make a cash offer on your house, I will work with you as a fiduciary to recommend the best course of action. However, if you don’t want to use an agent, and prefer to sell on your own, I would be happy to make you an all-cash offer.

If you’re interested in selling directly to an investor, without publicly listing the home on the MLS, but still appreciate the guidance an experienced representative can bring, I can put you in touch with investors I know in the area and we can negotiate an off-market sale. I have some investors who are moms and do this as a side-business, and I also know full-time mega-buyers who buy and rehab multiple properties per month, or scrape and build new… so we can find the right kind of cash buyer for you and your property.

One potential downside to selling to an investor is that they may not be interested in keeping your tenants in place. They may want to renovate the property or bring in their own tenants or re-sell the property at a profit. If that’s the case, you’ll still need to give your tenants notice that their lease will not be renewed and that they will need to find a new place to live. Proper communication will make the sale easier for all parties involved. 

Prepare Your Property for Sale

If you’d like to have your property vacant when you sell – which may garner a higher sales price, but also more work to get the property ready, be prepared to be patient, as you’ll have to get the tenants out and likely do some fix-up work to get the property ready to go.

1. 1. Notify your tenants and understand the time frame.

1. 1. Vacate the property and inventory the repairs that need to be done.

1. 1. Talk to your realtor about what repairs are profitable to make, and which can be skipped.

1. 1. Get the work done. (We can help you finance this, if needed.)

1. 1. List and sell the property.

If you follow my 4-P’s process to Prepare, Present, Promote, and Price the property correctly, you should be able to get it sold in about 30-60 days and have cash in your pocket by that time.

What To Do Next To Be Ready To Sell…

Tell Your Tenants You’re Selling And Start The Clock…

If you’ve decided to ask your tenants to leave before you sell your rental property in Seattle, it’s crucial to notify your tenants and kick off the preparation process.

This may involve cleaning, making repairs, and setting up the property to attract potential buyers. Presenting your property in the best possible light is key to a successful sale.

If your tenants still occupy the property, it’s vital to respect their privacy and living space during the sales process. Work together with them to plan cleaning, repairs, and staging at mutually agreeable times. Show sensitivity to any changes that might disrupt their daily routines, like scheduling viewings during their work hours.

However, these situations can often be tricky and it’s best to have a real estate professional involved. Feel free to message me in the form below with your questions. As landlord for many years, a property investor, and a licensed Washington State real estate agent, I will do my best to answer any questions you have and help you strategize on how to proceed with the sale of your home.

Whether you have a tenant who won’t leave, want to sell to the tenant in place, want to vacate the property before sale, or just don’t know what to do, I am happy to discuss this at length with you, and I won’t even bill you like your real estate attorney might… 😉

Property Valuation + Strategy Consultation

Deciding on a strategy for selling a rental property with tenants involves multiple factors, from legal considerations, to the timeframes involved, to maximizing your sale price.

Whether you choose to sell with a realtor, offer the property to an investor, or ask tenants to vacate, it’s essential to make the right choice for your situation.

If you’re unsure of the best path forward, we can help. Fill out the form below to request a free property valuation and schedule a strategy consultation with our team. Together, we’ll evaluate your options and tailor a plan that meets your goals.

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Get Help Selling Your Tenant Occupied

Downloadable Report + Consultation

Navigating a tenant-occupied sale can be complex, but with the right approach, it doesn’t have to be. Download our comprehensive Guide To Selling A Property With Tenants to understand your options, from selling to investors to negotiating with tenants.

Ready to take the next step? Schedule a free consultation to discuss your specific situation.

We’re here to help you sell efficiently and profitably.

Selling a property with tenants in place in Seattle, WA can present some challenges to any landlord.  But it can be navigated successfully with the right approach. Whether you decide to sell the house with tenants still living there, or choose to wait until the lease agreement ends and the tenants have decided to move out on their own, open communication with tenants is key.  Give the tenant adequate notice if they need to change their living circumstances and understand that a sale may be frightening and inconvenient for them.

There a few different ways you can sell a house with tenants and by evaluating your situation and discussing it with property management, By adhering to these guidelines, you can streamline the selling process and uphold the rights of both the landlord and the tenants. For expert assistance in selling your rental property in Seattle, reach out to Keller Williams Greater Seattle at (206) 578-3438.

If You Need Help Selling Your Tenant Occupied Home

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