How to Sell a Tenant-Occupied Home

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Selling rental properties can be challenging, particularly when they are occupied by tenants. Selling multi-family homes, though, can be a valuable niche for a REALTOR® to develop—provided you’re familiar with landlord tenant law and, in particular, the Landlord and Tenant Act.

The Basics, to Start

  • A multi-family building with four or less units is considered residential.
  • Any structure with five or more units is designated as commercial.
  • Potential buyers seeking an FHA, VA, or USDA home loan must occupy the residence.
  • Tenants living in a building when it’s on the market have specific rights granted by both state and federal law.
  • Important: Depending on the particular city or town, an inspection and a renewed certificate of occupancy may be required before the property can be put on the market.
  • While it might be easier to put an unoccupied building on the market, the downside is no rental income for a potential buyer.
  • Renters with a lease may be evicted prior to putting a property on the market. The landlord must issue a notice to vacate with at least 30–60 days notice in most states. The tenant must be notified by mail. The notice should specify a move-out-by date and instructions regarding keys, forwarding address, etc.
  • Unless a negotiated move-out settlement has been agreed upon by both parties, residents with a fixed-term lease that doesn’t have a termination clause may stay while the property is up for sale.
  • Tenants who have failed to pay rent may be asked to leave, provided the landlord has stipulated those terms in their lease.

Landlord-Tenant Law

The Landlord and Tenant Act outlines the terms and conditions that should be included in a rental contract or lease agreement. These rules are designed to protect both landlord and renter.

  • Security deposit: While there are some variations at the state level, a landlord must specify the cost and terms of a security deposit. Some states require a separate escrow account be set up and the deposit be returned within so many days after the renter has moved out
  • Monthly rent: The charge for rent must be clearly stated and cannot be raised during the lease period unless otherwise stated.
  • Utilities: The landlord must indicate which utilities are or are not included in the rent.
  • Building maintenance: While not always specifically addressed, the landlords should be expected to make repairs within a specified and reasonable amount of time.
  • Privacy: A landlord must notify a tenant in writing, at least 24 hours before entering their apartment.
  • Guest policy: A landlord may specify the number of guests and a time limit within which a renter may have guests stay in the apartment.
  • Pets: A landlord may prohibit pets.
  • Eviction: Disturbing other tenants, breaking a clause in the lease, or failure to pay rent, can be cause for eviction. To evict, the landlord must follow eviction procedure as described in the Landlord and Tenant Act.

Showing a Tenant-Occupied Property

Open communication with the current owner and renters is critical if you’re going to have a successful sale. Keeping the building in good viewing condition and scheduling walk-throughs with potential buyers is easier if you have a friendly rapport with existing renters. State laws dictate how much notice must be given prior to a showing; 24 hours is generally the rule.

A good REALTOR® wants to avoid instances where a tenant is uncooperative because he or she doesn’t want the building to sell. So, it’s important to empathize with the renter about the inconvenience they’ll experience. One way to ease the situation is to offer the renter a perk. This might be a discount on their rent while the property is on the market, a free weekly cleaning service, or a hotel room over a weekend during an open house.

For buyers, particularly first-time buyers, the multi-family home can be a great way to test the waters of homeownership. For those not adverse to taking on the role of the landlord, the income generated from renters can cover both the mortgage and maintenance costs. For the REALTOR®, a residential multi-family is a good alternative to offer your customers at a time when single-family homes are scarce and interest rates are on the rise.

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Tim Coutis

A freelance writer and content creator, Tim Coutis has served as a Creative Director and Project Manager for a number of both large and small businesses in the finance space. In addition to creating content on a range of topics, his work includes traditional as well as online marketing, blog posts and social media support. Connect with him at