Many people who are selling a vacant home will explore the idea of renting it on a short-term basis, while on market. It’s easy to see why this is an attractive idea: expenses including mortgage payments, taxes, utilities and insurance can potentially be covered by having a tenant in place. However, many sellers don’t think about the effect this may have on the marketability of their home. This article will explore some of the drawbacks of becoming a landlord when trying to sell a vacant property.
- They don’t want to move. Tenants usually will have no incentive to keeping the property clean and “show-ready,” which can impact a buyer’s first impression. They don’t want the inconvenience of moving again, so why get out the broom before a showing?
- They stick around for showings. On many occasions, when arriving for a showing of a tenant-occupied property, I will find that the tenants are either on their way out the door, or simply refuse to leave. This can have negative implications if they decide to start interacting with the buyers – anything can come out. Seemingly innocent statements regarding perceived defects or other “problems” with a home could have a serious impact on a buyer’s offer.
- They can be difficult to remove. Once a tenancy agreement has been formed; whether written or not, tenancy laws come in to play. In Nova Scotia, tenants on a month to month lease need to be provided with a minimum of
90 days noticeONE YEAR’S NOTICE* to vacate – this in itself would become a deal breaker for buyers who need a quick closing. (* NS law changed in Dec 2014. There may be ways around this – ask me.)
- Becoming a landlord can be costly. Your property insurance rate could rise, damage caused by unruly tenants may not be covered by their damage deposit, and your buyer could request a professional cleaning after tenants vacate. These expenses can add up over time.
Despite these downsides, having a good tenant who is sympathetic to your plight could be a good thing. I’ve worked with many sellers who managed to find mature house-sitters or family friends to rent, and it worked out fine. As long as the tenants understand the process and know that their presence could have an impact on the saleability of your home, it might turn out to be a mutually beneficial arrangement. If finding a tenant is a must, be sure to clearly outline the ground rules regarding showings, cleanliness, and time to vacate. All of these considerations could factor greatly into the quantity and quality of offers you receive! At the end of the day, ask yourself if the risks outweigh the rewards. Do all of the things that good property managers do: interview your prospective tenants, ask for references, and try to get a feel for how they will behave once in place. We’ve all heard horror stories about bad tenants; if renting is a must, don’t let this happen to you!