What To Do When You Have Tenants In A Short Sale? What do I do when I have a rental property? How do I handle that situation? First and foremost I always explain to my clients that first you are going to have to explain to your renters and tenants that the property is going to be put up for sale. That is going to be up to you and it’s going to be your responsibility to make sure that they are going to comply with the transaction. By that I mean they are going to have to allow buyers through the property with 24 hour notice to be able to see it so that they can determine whether or not they are going to write an offer. Most importantly you have to understand that they are agreeable to moving out when the bank issues the short sale approval letter and states that the tenants need to move out.
A couple of tips about that, one, I always recommend that homeowners are honest and up front with their renters. Don’t hide anything from them, let them know from the get go that the property is going to be sold and that they are eventually going to move out. Secondly it’s up to you to determine whether or not you want to tell them if it’s a short sale or not. It’s not required but it does provide some benefit in a sense that tenants understand that the short sale process take some time.
With that being said, many times we as a real estate brokerage will communicate with the tenants and let them know where we are at the transaction. We will let them know that we are looking at 3 months out, 2 months out and then eventually when it is 30 days that it is that they need to move out. It can be beneficial from that stand point and they may choose to stay on that property while the transaction is going on.
Sometimes tenants don’t want to be cooperative, at the particular juncture you have a couple of different options. One is to kick them out if they are not on a lease and ask them to leave before the transaction is completed or you might do a something a little bit softer such as seeing if you can give any concessions to them. Many people I’ve worked with before have offered their tenants a reduction in rent maybe a 100, 200 or 300 dollars, whatever it is on a monthly basis so that the tenants are cooperative in having showings and that they move out in the time that they are supposed to. That can many times incentivize them to cooperate with the process. They are getting a reduced below market value rent and it’s beneficial to them and everybody else involved. If they are going to be uncooperative then it’s in your best interest to try to get them out of the property as soon as you can so that there are no problems.
If we do structure a short sale deal and get an approval but then the renters don’t move out then it causes a lot of complications with the transaction. Such that the buyers might not be willing to move forward while the tenants are still in the property and you might lose your opportunity to do a short sale and it might result to getting a foreclosure. So structuring these things and speaking with your tenants from the very beginning is probably one of the most important things to consider. The next thing you need to look at whether you have a lease in place. If they have a lease in place that does extend to several months pass the possibility of getting these transactions completed. Then they are legally allowed to stay in the property and any prospective buyer would have to inherit those tenants. So a couple of things about that again, one, you could wait to do a short sale. Two, we could attempt to do a short sale but we have to find buyers that are agreeable to keep those tenants in there through the end of the lease or three, you can try to incentivize them. Maybe give them a month free. Maybe give them a reduction of rent or something along those lines in order to break their lease and move out a little bit quicker.
You as a homeowner are going to know your tenants better than myself or anybody else and so you are going to know a little bit more on how deal with them and how to approach them. If you have a property manager involved, then you have to leave this to them as far as negotiating any of the contract, getting them to move out to reduction of rent and all of those things.
If you have any further questions about the situation give me a call. I will give you a free consultation. We can talk about the matter and come up with a game plan about how are going to deal with your particular tenants. Those are some of the basics to take in to consideration.
Thank you very much for watching this video on, What To Do When You Have Tenants In A Short Sale?