When selling a property in a market as competitive as Toronto, it’s critical that a listing agent and their partners work with the seller to do everything possible to make that property stand out, and be positioned to sell as quickly and for as high a price as possible.
Whether that’s preparing the written copy for the listing, taking the time to ensure every photograph shows exactly what is intended, or determining the most appropriate pricing strategy, every little detail matters.
How Is Selling an Investment Property Different?
What happens, however, when much of the freedom to prepare every minute detail is compromised? In a country where real estate has become a fundamental component of many investment portfolios, we hear more and more about investment properties. Of course, with investment properties, comes tenanted properties. Selling a tenanted property provides a unique challenge and a challenge that should not be taken lightly.
The Relationship Between Landlords and Tenants
As we’ve discussed many times on the Toronto Realty Blog, the relationship between landlords and tenants has never been more contentious, and you can read more about that here.
If you need a metaphor, think of the rivalry between Toronto Maple Leafs and Montreal Canadiens fans, but instead of a hockey game, the conflict is over the places people call home, and hundreds of thousands of dollars of people’s life savings.
The Key to Selling a Tenanted Property
So, what does an owner of a tenanted property need to know before deciding to take their property to market? Most critically, it’s important to know the rights afforded to both themselves as landlords and, even more importantly, the rights the tenants have.
In short, a homeowner is allowed to sell a property while tenanted, but they do not have the right to evict a tenant prior to selling.
A seller must respect all the previously existing rights the tenant has throughout that sale, most notably 24 hours notice prior to any access to the property (critically: any requested showings for a potential buyer), and said showings must be done at a “mutually agreeable” time, and done so at a “reasonable” hour. One of the most effective ways to sell a property is to allow potential buyers unfettered, immediate access when interested. In a market where you want everything to be as simple for a buyer, and where things can move very quickly, accommodating showings for a tenanted property can make the process more difficult.
Selling a home in Toronto is different for everyone, but with our Selling Guide, you can get a head start on the process. Download it here.
How to Market a Home for Sale when Tenants Are Involved
Which brings us to marketing the property. As you know, our team at Toronto Realty Group prides ourselves on being a full-service brokerage, and on the sell-side that “full-service” starts with leaving no stone unturned to ensure a property is presented to the market in the best way possible. That includes working with the seller on many or all of the following and more: staging, painting, cleaning, decluttering, fixing any small deficiencies in the property (for example, repairing a loose door handle, or ensuring all light bulbs match), larger renovations on the property (refreshing a kitchen, or putting new floors in a basement), professional photography, 3D tours, creating professional floor plans, conducting a home inspection, etc.
As you can imagine, all of these tools at the disposal of a seller can become compromised in a situation where the property is tenanted. Perhaps the tenant doesn’t want to change the colour of the wall, or a well-intentioned tenant mistakenly loosens the fixed door handle while the property is on the market.
If a property is tenanted, it means that it’s being lived in. Even the cleanest of tenants have to cook and do laundry, and as silly as it sounds some dirty dishes in the dishwasher, or a load of laundry in the dryer can be enough to leave the wrong impression in the mind of a potential buyer. Not to mention, every tenant has the right to privacy.
A tenant is not obliged to allow photography of the unit, which can eliminate recent, up-to-date photos of the property, or perhaps any photos of the property at all, and you can say goodbye to the 3D tour! Needless to say, a tenanted property can prove to be a challenge to market as effectively as possible.
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Will People Buy a Tenanted Property?
Just as importantly – selling a tenanted property can reduce your potential buyer pool, even if you manage to alleviate all the above concerns as best as possible. Ultimately, real estate sales prices are driven by supply and demand, and there is fundamentally a lower demand for tenanted units than an otherwise identical unit which is vacant.
There are plenty of buyers who would simply not entertain taking on a tenanted property, whether it’s because they don’t want to take on the risk of evicting a tenant post-closing for personal use, or if they are an investor and they’d rather either choose their own tenant, or not take on a tenant who is paying below market rent. One of the goals when presenting a property to the market is to maximize the appeal to the widest pool of potential buyers, and the truth is that a tenanted property will work in opposition to that goal.
Selling a Tenanted Property is Different, but Not Impossible
Now, this isn’t to say selling a tenanted property is not feasible. The fact is, selling real estate is a deeply nuanced and personal consideration, and there are plenty of folks who will choose to move forward with selling a property that’s tenanted.
The truth is, tenanted properties sell all the time in this city. Whether it’s to end-users who end up serving the existing tenants with a notice to evict for personal use or investors who are happy to take on existing and vetted tenants in a unit that they find appealing.
Check out our staging case study: From Student Rental to Starter Home right here.
Selling a tenanted unit is more than possible, and provided the property is presented and priced appropriately, can be a very successful endeavour for many sellers.
Ultimately, like any undertaking in life, if respect and transparency are given to all parties involved, a tenanted unit can be transacted successfully. A qualified and experienced REALTOR can help any seller navigate whatever situation comes to be.
Whether that is assisting in effective and accurate communication with existing tenants about the process and the rights afforded to them, communicating the circumstances to any prospective buyer, or helping ensure a smooth transition of the existing lease upon closing of the property, partnering with the right real estate professional can help any seller navigate the situation successfully, ethically, and lead to a conclusion of the transaction that leaves all parties feeling appropriately treated. And isn’t that what it’s all about?
Do you need help selling a tenanted property? We’re here for you! Give us a call at 416.642.2660 or email us at admin@torontorealtygroup.com today.
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