Selling a House with Tenants? Your FAQs Answered Here

According to recent Census data, less than half of all Memphis homes are owner-occupied. That means that the majority of properties are available for rent, and many of them are currently tenant-occupied.

What if you own a rental property in Memphis but you don’t want the responsibility anymore? What are your landlord selling responsibilities?

Today, we’re going to talk about selling a house with tenants, covering topics like:

Relevant Tennessee laws
Best practices for talking to tenants about selling
Finding the right buyer for your tenant-occupied house

Read on as we answer your FAQs about selling a rental property that is actively occupied.

Can You Sell A Tenant-Occupied House?

The most common question we get about selling a house with tenants is also the most basic question: is it allowed? The short answer is yes, although it does create complications that typical sellers don’t have to navigate. Let’s take a closer look at tenant and buyer rights in this unique situation.

Tennessee Tenant’s Rights During a Sale

During a sale, you will need to abide by tenant rights as outlined by the state of Tennessee. You don’t need your tenant’s permission to sell the property they’re living in.

However, in most cases, the lease will transfer to the new owner, who will need to honor the terms of the lease as they already exist. You cannot force a tenant out of their home without cause.

What the Buyer Needs to Know

When working with a potential buyer, you need to disclose the conditions of the lease. This includes:

What type of lease your tenants signed (e.g., short-term or fixed-term)
When the lease is set to end and if tenants have already renewed
How much tenants will owe in rent each month

As you might expect, traditional buyers aren’t looking to take on tenants. These circumstances can slow your sale or reduce your property value.

Tennessee Eviction Laws

Some sellers hope that evicting tenants for a sale is a viable option. NOLO outlines the basics of Tennessee eviction laws. You must have just cause and, depending on cause, provide:

14 days to cure or quit
30 days to cure
3 days to quit

Only when a tenant has done something extreme, like commit an act of violence or engaged in drug-related activities, can you remove them from the property in as little as three days.

What Are My Basic Options When Selling a House With Tenants?

You know you want to sell your rental property, but you don’t know how to go about it. Here are some of the ways you can approach the sale, from waiting out the lease to selling to an investor.

Waiting for the Lease to End

Unless your tenant has already renewed their lease for another term, you could wait until their lease ends before listing the property.

Keep in mind that you’ll need to provide notice that you won’t be accepting a renewal, giving tenants time to make other arrangements. For example, if your tenant is on a month-to-month lease, you will need to provide notice 30-60 days before you expect them to move out.

Selling to the Tenant

Another option is to inform your tenant that you intend to sell and give them first dibs on the property. Require tenants to get mortgage pre-approval before finalizing the deal to ensure they are able to finance the purchase.

If you want to incentivize the purchase, consider taking a retroactive lease-to-own approach. In other words, subtract all (or some) of the rent paid up until the sale from the total property value.

Negotiating Early Termination

If you’re in the middle of a fixed-term lease and the tenant doesn’t want to buy the property, attempt to negotiate an early termination.

For example, you can offer to reduce rent for an agreed-upon amount of time and waive any early lease termination fees. This will give tenants more financial wiggle room to find a new rental home.

Hire a Real Estate Agent

If you’re interested in selling a house with tenants on the traditional market, you should hire a real estate agent. They are more likely to have connections to real estate investors who are willing to add rental properties to their portfolio.

Note that you may have to pay agent fees or make concessions to your buyer.

Sell to an Investor

Did you know there are cash buyers who are willing to buy Memphis properties in any condition? That includes properties that are currently occupied by tenants, even if the lease is nowhere near termination.

Selling to a cash investor is a much different process than selling on the traditional market. Learn about those differences to make an informed choice.

How Should I Approach Tenant Communications When Selling?

Choosing to sell a rental property is going to have a major impact on your tenants’ lives, whether they need to find somewhere new to live or will pay a new landlord. Approach communication mindfully and focus on mutual cooperation. Here are a few tips to keep things legal and respectful.

Provide Early Notice

No matter what your ultimate plans and goals are in regard to your tenants, you should let them know as early as possible that you plan to sell. Early notice allows them to:

Evaluate their own finances
Decide if they want to stay or move
Prepare for property showings

If you wait until the last minute, tenants may feel blindsided and reluctant to cooperate with your requests.

Discuss the Impacts in Person

If possible, don’t just send a letter to your tenants informing them of the future sale. Ask to meet in person to talk about what this decision means for your tenants.

This gives you the opportunity to present your ideas (e.g., early lease termination or tenant purchase) and assure your tenants that they aren’t going to lose their home unexpectedly.

Create a Showing Schedule

Tenants in Tennessee have a right to live peacefully. In this case, that entails giving at least 24 hours notice any time that you or someone else will need access to the property.

Work with your tenants to create a showing schedule. That way, they can get the property cleaned up and make arrangements to go elsewhere (if so desired) before potential buyers show up.

Offer Incentives for Cooperation

We mentioned earlier that some owners will offer tenants incentives to terminate the lease early.

Alternatively, you can offer incentives to increase tenant cooperation with the sale. For example, you can reduce monthly rent in exchange for short-notice showings.

Should I Sell My Tenant-Occupied Home to Investors?

Your tenants don’t want to buy your rental property and you don’t have time to wait for their lease to expire. Selling to a cash buyer or investor is the next best option. Here’s why.

Faster Turnaround

As we mentioned earlier, selling a tenant-occupied house on the traditional market isn’t going to be easy. Because so few typical buyers will want to invest in a home that isn’t move-in ready, your house may sit on the market for a long time.

If you sell to a cash buyer, you can sell your house today. All you have to do is share some key information, accept the offer, and relax.

Familiarity with Relevant Laws

Cash buyers already know how the rental property purchase process works. You don’t have to educate them on tenant rights or worry that they’ll get cold feet once they learn what their purchase entails.

In fact, cash buyers will even take care of evictions for you. In other words, if you have problem tenants who are breaking the law or violating your lease, you can still sell your house to a cash buyer.

No Need for Tenant Removal

Maybe you’re not comfortable with the idea of talking your tenants into terminating their lease early. Maybe you tried, but they aren’t interested in taking the incentives.

You can skip that entire process when you sell to an investor. Investors aren’t interested in buying properties for their own use, and they’re willing to take on existing tenants.

No Repairs Needed

Why does property value tend to drop when you’re selling a tenant-occupied house? Buyers have to accept any wear and tear the tenants are currently contributing to.

If you don’t want to invest in improvements to make your house buyer-friendly, your best bet is to work with a cash buyer. They’ll purchase your house in any condition and under any circumstances, something you can’t expect to find on the traditional market.

We Buy Tenant-Occupied Houses in Memphis

Are you selling a house with tenants? If so, we hope we’ve answered your most pressing questions, from what your rights are to what kind of buyers to market to. Now, it’s time to take the next step in securing a buyer.

We Buy Houses will call you back within minutes of requesting an offer. Once we know more about your property, we’ll extend that offer, usually in less than 24 hours, with cash on the table in less than a week. Contact us today and let’s get started.