Advice on selling a condo that I rent out

Asked by Shelby.clark, Chicago, IL Sun Jun 19, 2011

Hello! I own a condo in Chicago that I rent out. I am about to renew my tenant's lease for another year, but I may want to sell the condo during this year. What happens if I need to sell the house during a lease? Can / Should I put in a clause that I'll pay each tenant some inconvenience fee if they do need to move out? I can't really afford to not renew the lease and try to sell a vacant apartment. Thanks!

Shelby

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14
Philip Sencer, Agent, Chicago, IL
Sun Jun 19, 2011
If the tenants have a lease then you cannot ask or force them to move out before the end of that lease term. That is the purpose of a 'lease'. If you do not renew the lase, but let them go month to month while you try to sell, then each side can give the other 30 days written notice to move. The risk is that tenants might not want to hang around while you are trying to sell so they might just leave.
This is a problem for many folks trying to sell an investment property. The best time of the year to sell a condo is Spring/Summer. Your timing is not so good even in a decent market and we are NOT in a decent market. Have other units in your building sold recently? Is it a popular building with good financials? What is the % of owner occupancy?? There are tons of condo buildings with poor financials and low owner occupancy rates that most banks will not even make a loan to even if you find someone who wants to buy it.
1 vote
Jeff Nobleza, Agent, Chicago, IL
Sun Jun 19, 2011
As stated below you can offer a month to month lease to the renter. If the renter is uncomfortable with such a lease you can try to insert language saying that either party would give at least 60 days notice - everything is negotiable.

However, you should check your condo association's rules and regulations concerning rentals. Many associations have rules on minimum lease terms (6 months to one year). The way around this is to write a 6 month lease where either side has an option to cancel early. However, if your HOA or management company gives you a hard time about this then that may suck.

The best advice that I can give you is to consult an experienced real estate agent about this. Most real estate agents are knowledgeable about how to handle such situations.
1 vote
Patty Romero, Agent, Homer Glen, IL
Wed Jun 29, 2011
There is a clause you can include. It's best if it's rented of course. Are the tenants aware of your plans to sell? Are they willing to show the unit? Lots of things to consider. Also, consulting with a real estate attorney and having the attorney prepare the lease is great advice.

Good Luck to you!
0 votes
Robert Pratt, Agent, Chicago, IL
Thu Jun 23, 2011
Hi, Shelby.
This is a great and totally reasonable question :).

It is not a bad idea for you to consult a real estate attorney - and we always recommend that whenever you are exeuting a contract with another party.

That being said, it is likely possible that you could include what is called a "kickout clause" - granting you, as landlord, the ability to terminate the tenant's lease early with a certain amount of and type of notice (and possibly with the offer of some consideration should that option be exercised dude to a sale).
Best bet for you is to consult a good real estate agent and attorney about your sale and tenant.

Give us a call at 312.242.1000 any time - we will be happy to help!

Thank you, again, for the question!
Web Reference:  http://www.dreamtown.com
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Mon Jun 20, 2011
Not sure if my answer is really there or not - there seems to be a disappearing response issue now and then - so I'll try again and excuse me if a repeat - yes, by all means build in a clause that gives you the right to sell and gets the agreement of the tenant to vacate prior to the lease end date if you do. Also recommend getting their agreement to have a lockbox on the property if you intent to use one.

Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Mon Jun 20, 2011
Best to include if you are considering the possibility of a sale. Also, be sure that it is agreed to by the tenant that he will allow access to show - and allow a lockbox on the condo if you intend to use one.

Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Evelyn S. Fr…, Agent, Chicago, IL
Mon Jun 20, 2011
You can always include a "kick out" clause which would include a "pay to move" with a mutually agreed to time frame.

Or as pointed out already, go month to month, it's probably the easiest, most convenient & affordable.
0 votes
Matt Laricy, Agent, Chicago, IL
Mon Jun 20, 2011
I think the easiest thing would be to get them to sign a year lease. This way your tenant cant up and move out on you. But let them know you plan on putting it on the market, and that you will give them 24-48hrs notice before showings, and make sure they are OK with this. If they arent willing to show the property, you wont be able to sell this. Also, insert a 30-60 day kick out clause. This means if you get a contract, the new owner has the option to kick them out after the time expires. Also, make sure you get an agent who experienced in these types of sales. Interview a few, and go with the one you mesh best with. I would be happy to help.

Matt Laricy
Americorp Real Estate
Managing Broker, e-PRO
mlaricy@americorpre.com
708-250-2696
Web Reference:  http://AmericorpRe.com
0 votes
Bernie, Agent, Chicago, IL
Sun Jun 19, 2011
Always great when the condo is rented. In today's market, it's always nice. Of course, it's nicer to sell. But in today's market, best to be cautious. Bottom line is to actually get a real estate attorney to write in the lease.
Happy to give a consultation. Thanks
0 votes
Barb Van Ste…, , 60625
Sun Jun 19, 2011
Shelby, the question is: Why are you considering selling your condominium? Renting is always a financial health situation whereby you are protecting your assets as best as you know how.

The next question is: Can you afford to do a discounted rental on that unit as some have suggested?
How well do you know the current tenants and will they cooperate with the sale of your condo, should you decide to do so during the term of their rental agreement/period?
Flip side of the coin: Would those tenants renew their lease even if it were on a month-to-month, knowing that there is a possibility of you selling your condo?

The question you ask is: "Can/should I put in a clause that I'll pay each tenant some inconvenience fee if they do need to move out?"

Yes you could put in a clause but you need to be specific on the time frame of notice to move, when they would need to move out (prior to closing) and depending upon how many tenants are in the unit, pay for their moving costs which could run you $500 plus for each mover, depending upon where the tenants would be moving.

You also need to consider that you may need to "spruce up" the unit just prior to closing. So I would allow time for that as well.

I hope this helps you. If you need verbage for the clause, I strongly suggest you get an attorney in who would be handling the sale of your condo to guide you, to make sure you don't get caught in a bad situation should you decide to sell.

Best of Luck,

Barb Van Stensel
Keller Williams Lincoln Square
2156 W. Montrose
Chicago, IL 60625
0 votes
Jeff Stewart, Agent, Chicago, IL
Sun Jun 19, 2011
Hi Shelby,

I don't think anyone has really offered their help yet so I would love to help you as your REALTOR!

I just finished helping a homeowner sell their tenant-occupied condo and did so while keeping the lines of communication open to everyone leaving a happy homeowner AND tenant. If you're able to afford renting your investment at a discounted rate, you will definitely get a new tenant who is more than happy signing a lease with a 30 or 60 day kick-out clause. We will just need to include that and a clause allowing showings with 24 hour notice in the lease.

Interview your prospective tenant, ask for a previous landlord reference to see how clean they kept their old home. The best thing is to have a clean, organized tenant so buyers can fall in love with your investment property.

Again, I would love to show you how seemless this process can be. It can be a difficult market only if you make it but if you have a great agent helping you, it makes a huge difference!

Jeff Stewart
REALTOR®, @properties
3101 N. Greenview Avenue, Chicago, IL 60657
309-269-3499 CELL
jeffstewart@atproperties.com
0 votes
Ruby Neichter, Agent, Louisville, KY
Sun Jun 19, 2011
I would suggest you keep the tenant on a month to month lease and let them know that you will try to give them as much notice as possible when you sell. You want them to cooperate with showings so I would even offer a bit a discount on their rent if they are willing to stay on month to month and agree to show the unit anytime you have a showing request.
0 votes
Joe Schiller, Agent, Chicago, IL
Sun Jun 19, 2011
exactly.. cooperation is 2nd key, staging is the third most important thing, and not missing rent is the 1st most important. month to month, discounts when its on the market for 100% access and price it to sell in 30 days.. the market is DEPRECIATING.. longer is not better...mark as helpful if deserving and use my link to contact for the best agent..Happy Fathers Day!
Web Reference:  http://www.joeschiller.net
0 votes
Ryan Smith, Agent, Murrieta, CA
Sun Jun 19, 2011
You can go month to month and just explain to each tenant your plans to sell this year so that it won't be a shock to them. I wouldn't pay them anything.
0 votes
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