Selling a property to tenants?

Question

I own a SFR that I'd like to sell shortly, as most of my capital is tied up in it. It's currently being rented by good tenants--I'd like to see if they'd like to buy the property first before putting it on the market.  My property management company has taken care of everything from screening to now, rent collection, repairs, etc.--so they've never even met or talked to me.

Should I approach them/introduce myself when I ask if they want to buy, or like everything else up to this point, should I communicate through my PM? (I'm thinking the latter wouldn't be in their best interest if there's the possibility of losing a property, though).

Thoughts?

Thomas S. · Answer

How do you see selling it to them off market as a win for you?

I would simply have the PM inform them it is being sold and list it. If they want to buy it, which is extremely unlikely, they can make an offer like anyone else. If you do not you will never know if you got market price.

Robert Williams · Answer

I would communicate through your PM, assuming your PM has a good relationship with the tenants.  You're going to have to notify them that you're planning on selling at some point anyway if your plan is to sell the home regardless of whether or not the tenants are interested in buying it.

Are there any local laws, rules, and regulations that you have to follow regarding tenants in a home you plan on selling?  In DC, we have something called the Tenant Opportunity to Purchase Act, which has very specific documentation and timeline requirements when selling a tenant-occupied home.

Account Closed · Answer

Vonetta, I also see the benefit to you in saving an agent's commission and having to clean it up and get it show-ready.  Not only inside, but outside - landscaping, power washing, painting, etc.

I would communicate with them myself.  I don't like someone else doing my communicating for me.  This would be your deal with these people.  The negotiations should be between you.

You could even make it easy for them - tell them about FHA financing, for instance.

I enjoy negotiations.  I actually think it's fun - call me weird.  But, I'd approach them in a friendly manner and introduce myself (probably over the phone first) and say I'm going to sell the place and wondered if you'd like first dibs.  The price is $______________.  In case you didn't know about it, you can get FHA loans with only 3.5% down.  I can send you a link to the government website, if you want to check it out.  Anyway, why don't you take a few days to think about it, and I'll get back to you.  Do you want to give me your email address so I can send you that link on FHA loans?"

If they're interested, but they don't know what to do, tell them their lender should be able to walk them through it, etc.

I think it could be great for you.  I'd do it.

Vonetta Booker · Answer

@Gagan Johal, I wound up listing it with the agent on my property  management team, since I work full time & don't have the time to do the listing myself. It's been on the market for about 2 weeks & although the tenants couldn't afford it at this time, it's now under contract with another buyer. ☺

Gagan Johal · Answer

@Vonetta BookerHello there.I am also in the same predicament. I wanted to see if you ended up selling to your tenants or to listed it? update usThank you.

Vonetta Booker · Answer

Thanks, Sue K.! :-)

Thomas S. · Answer

I see no benefit, no time savings and only benefits to them. I see involving them as dragging it out as they will need to get qualified if they were not already looking to buy. It's going to slow down the sale.

Assume they are not interested otherwise they would not be tenants.

Vonetta Booker · Answer

Greg S., I'd see it as a win because if they were interested, had proof of funds, etc & were in a position to buy it then it could be done quickly, no turnover, no one has to move, etc. Mind you, the offer would be at market rate anyway, for them as well. If they weren't interested, then it would simply be listed.

Char Prado · Answer

I agree with Greg S.  "List it" and if current tenants make an offer with proof of funds then give'm "first dibs."

Selling a property to tenants?

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