“Hey Gary. We want to sell our parents’ old La Jolla home in the Muirlands area. The thing is it’s leased through the end of July. If we sell, what happens with the lease? Do you think a buyer will just take it over?”
Answer:
Leases “run with the property,” not the owner. That means if you sell, the lease is binding on the new owner.
Since you’re not selling an investment property, you’ll severely limit your pool of potential buyers if you try to sell a leased home. And that will get you a slower sale at a lower price. Not what you want.
My advice…
Ask the tenant if they’ll mutually agree to end the lease early. If they don’t jump at the chance, offer them that universal incentive:
MONEY.
How much? There’s no formula, but perhaps 1/2 to 1 month’s rent. It all depends on how soon you want or need to sell.
If the tenant agrees to end the lease early, should they stay while the home is for sale? It depends. Here are 2 scenarios:
1. The tenant is tidy and cooperative with showings, including a lockbox…
…Since we don’t know how long it will take to sell the home, make the agreement flexible. Have the tenant stay until you give them a 30-day notice.
2. The tenant is a rude, filthy, uncooperative slob…
…Give them their notice now, provided you can afford to make the payment without getting rent.
Now pay close attention to this next step:
Put your agreement IN WRITING and have the tenant SIGN IT. This lessens the likelihood of you facing an ugly situation where you sign an offer with a buyer, committing to deliver the house vacant, but then the tenant suffers a bout of amnesia and refuses to move. That could land you some new friends…attorneys.
Next, when you get an offer, negotiate an escrow period that allows enough time for the buyer to do their inspections and for you to then give the tenant the 30-day notice.
If the inspections are OK, give the notice, have the tenant move, pay him or her what you promised, close the escrow, and live happily ever after.
