Selling with Tenants Still In

Sometimes a landlord needs to sell off a rental property and sometimes they still have their tenants in when the decide to list. For some landlords that are carrying a loan on the property, they may need to have the rental income to maintain the operating costs on the property. Ideally have the tenant move out first and prepping the home for sale is going to yield the best price for the seller. But things are not always ideal.

For sellers keeping a tenant on through the listing there are many hurdles. First the tenant has a right to 24 hours notice before any showings (Washington State). The seller may want to make a written agreement with the tenant to cooperate with agents for showings and keep the property spiffy with a lower rent payment as the "carrot" of inducement during the listing period.

Tenants can also be notoriously unreliable when they know they're on the way out. This can lead to closing delays if they are unable to move out in time, difficulty in showing the property and other setbacks to selling.

I have found that a financial inducement to perform is usually pretty effective. Listing agents and buyer's agents should also council both parties to these potential side effects of a transaction for a property with existing tenants. Unless the new buyer wishes to take on the tenant, things may not flow as smoothly as a transaction without renters. In the end things tend to work out.

Sellers will almost certainly get a better price if they remove the tenants before listing and have a nice move-in ready property. Selling for $10-20k more could be worth eating a few $1500 monthly rent payments.

Stay Involved with your HOA

HOAs can be a great thing, but they can also digress into an ugly beast. Homeowners should never be apathetic about the HOA. Going to meetings and participating in HOA elections can be very important on those occasions where the association has to make tough decisions.

Sometimes homeowners will react in a knee-jerk fashion and call for a strict revision to rules that might be an overreaction that could lead to unnecessary turmoil. Homeowners that do not participate in the process can be left behind unwittingly.

Sometimes an elected HOA president might develop tendencies to overreach his or her authority. Homeowners are wise to vote out these unreasonable people. If things get really out of control there is legal action than can be brought against the HOA and if the problem centers around an individual, that person could find themselves in a great deal of legal trouble if they are found to have abused their power. The HOA is for the benefit of the community and each property owner should have an equal vote in any processes that HOA oversees.

Generally an HOA will be setup with a super-majority requirement for major rules changes such as banning rental properties or something severe like that. It all depends on the HOA's written bylaws. I have seen some require 75% approval and yet others with a simple majority.

When buying a home in a neighborhood with an HOA, always read through the HOA rules, guidelines, and bylaws to make sure you are comfortable with how things are controlled and how rules and regulations are both enforced and changed. 

When living in a single family detached neighborhood, the HOA should have modest regulatory authority. Of course condos have to be more strict since the individual owners of the units own only the space between the walls. The land and building structures are cooperatively owned by every one in the community.

I run into buyers that will not buy a home in an HOA and I feel that is a bit of an overreaction. A well written set of bylaws with limited control for the HOA can lead to higher property values and less of a decline in neighborhood conditions over time. Buyers just need to make the effort to read through the documents and maybe even have an attorney skim through if something looks out of sorts.

HOA's are great... until they're not ;) Due diligence is always the best course of action.

Great Market, a Few Holes Though

This market is starting to get sizzly again, but like the title above suggests, there are some holes. Most segments are seeing a little bit of a seller's advantage, but aside from the entry level sub $325k market, conditions are mostly neutral. 

There is this one anomaly however. Two story houses with 3-5 beds and 2200-2600 square feet, priced in the 400-500k range are in rather plentiful supply. Buyers actually can kick a few tires and even smack the price around a bit on a mid-priced multi-level house.

Builders are 'all in' on this price range and they are producing them in large quantities. This is dragging down the resale market in the size and price range. While the entry level, mid price single levels, and even some of the upper end ranges are smoking hot, this mid priced two story segment is favoring buyers right now.

The market is screaming for single level houses right now. But single level houses, particularly in the larger size ranges like 2000 plus SF require a larger lot to support the bigger 'footprint'. Builders are trying to stay in a price point that is affordable for enough people to support the development projects they are building. Land has become the most expensive element in our market and so a two story design allows builders to build more houses on the same amount of ground. So we are seeing this play out in the market as hundreds of new houses are coming available and many are priced in the $400-$500k range.

So if you are looking for a "value" in this market larger two story homes in that 400-500k range could be your ticket.