Real Life Examples: How to Sell a Tenant-Occupied Property in Ohio
We have purchased many tenant-occupied properties. From those experiences we have learned some common themes in the problems sellers face when trying to sell their tenant-occupied homes in Ohio, and we have come up with a few rules that we follow when purchasing tenant-occupied properties.
The root causes of these problems have often been the same, regardless of whether the home was in good or bad condition, and regardless of whether the house was in Cuyahoga County, Portage County, Summit County, Medina County, Geauga County or Lake County, Ohio.
From our purchases of tenant-occupied properties, we have come up with a few rules that we follow. Following these rules, which I go into detail about below with specific real-life examples, can help improve your chances of successfully selling your tenant-occupied house in Ohio.
TABLE OF CONTENTS
Rule #1: Do Not be Combative with Your Ohio Tenant (In Fact, “Kill Them with Kindness”)
Can’t I Sue My Ohio Tenant if They Don’t Comply with Showing Obligations?
Example #1: The Landlord-Tenant War in Summit County, Ohio
The Phone Call to Resolve Objections to Showings
How to Diffuse the Situation with Your Tenant-Occupied Ohio Home
Real-Life Result with Ohio Tenant By Changing Tone of Communication
The Lesson on Resolving Tenant Objections to Showings
Rule #2: Understand Key Terms of Your Lease that Relate to the Ohio Home Sale
Month-to-Month or Fixed Term Ohio Tenant
Will it be Easier to Sell if the Ohio Lease is either Month-to-Month or Expiring Soon?
Is it Ever Easier to Sell a Tenant-Occupied Property?
Example #2: The Poorly Drafted Ohio Lease Term Clause
Solution to the Poorly Drafted Ohio Lease
Upgrades in Exchange for New Lease Agreement
All Cash Offer for Ohio Tenant-Occupied Property with Bad Lease
Lesson for Selling Tenant Occupied Ohio Home with Bad Lease
Legal Solution to Selling a Tenant Occupied Ohio Home with Bad Lease
Rule #3: Provide Plenty of Notice to Tenants for Showings in Ohio (and Send Reminders)
Rule #4: The Last Resort – Create Financial and Other Incentives for Your Ohio Tenant
The Benefits of Financial Incentives When Selling a Tenant-Occupied Ohio Home
Sell Ohio Home Quickly by Aligning Your and Your Tenant’s Goals with Financial Incentives
How Much to Offer Ohio Tenant for a Smoother Sale Process
Conclusion: How to Sell a Tenant-Occupied Home in Ohio
These are rules we have taken away from our experiences buying tenant-occupied properties in Northeast Ohio. They may help you, as they have helped us, have a smoother sale process regardless of whether you want to list your home on the market or sell your house fast for cash to a Northeast Ohio-based buyer like us.
Rule #1: Do Not be Combative with Your Ohio Tenant (In Fact, “Kill Them with Kindness”)
Rule #1 is the most important rule. If you feel that you have a very bad tenant who is doing bad things you may hate rule #1 and find it controversial. In other contexts this rule may not make sense, but if you are trying to sell your tenant-occupied Ohio home, and particularly if you want a quick sale, this rule applies.
The bottom line is that if you want a smooth sale process for your tenant-occupied Ohio house, the last thing in the world you want is a tenant who:
(i) doesn’t respond to your texts or calls in a timely manner;
(ii) will not even pick a sock up off the floor to make the house a little cleaner for showings;
(iii) considers you to be the enemy;
(iv) has zero incentive to help you; and
(v) in situations like the real life example we discuss below, refuses even to agree to showings (sure, your lease may say the tenant is obligated to allow showings, but that does not mean they will honor their obligation, actually open up the door on their own, and/or refrain from scaring away potential buyers by making a huge scene if you open the door and come inside with a potential buyer).
Can’t I Sue My Ohio Tenant if They Don’t Comply with Showing Obligations?
There is a time and place for litigation (lawsuits, eviction proceedings, etc.). The landlord-tenant relationship can break down so badly such that it becomes a necessity to go to court in Ohio to resolve issues like non-payment of rent, destruction of property, breaches of the lease, etc.
Rule #1 does not say that you should never sue your tenant. Rule #1 specifically relates to the period of time during which you are trying to sell your Ohio home and need a tenant’s cooperation to make that process go smoothly. By its very nature litigation is often a lengthy and unpleasant process, certainly not conducive to selling your Ohio property quickly or attracting buyers.
Considering that many cities in Northeast Ohio require point-of-sale inspections before you will be legally allowed to sell, and you will need your tenant’s cooperation to get the City inspectors inside the home, it is exceedingly important that you try to avoid getting embroiled in a legal battle with your tenant. If you want to learn more about the point-of-sale process, check out our articles on the subject here: How to Prepare Your Home for a Point of Sale Inspection and How to Sell a House with Point of Sale Violations.
Example #1: The Landlord-Tenant War in Summit County, Ohio
We received a call from a seller in Summit County, OH who was at their wit’s end with a tenant. The tenant had destroyed the home through hoarding, extreme lack of cleanliness and failure to notify the landlord about problems until the problems had caused significant damage.
The tenant had also not paid their rent for over a year.
The relationship between the landlord and tenant had completely broken down to the point where their communication was essentially insults, blame and anger. In our first conversation with the seller, they informed us that they had tried to send a realtor to the property after notifying the tenant and the tenant had been home but refused to open the door.
Another potential buyer had gone to the home and had the same experience. We were essentially told that we could try to get inside but, “good luck.”
The Phone Call to Resolve Objections to Showings
We had been given the tenant’s phone number (I will not use her real name here, but let’s just call her Jane for ease of reference), so we gave her a call. The first minute of the call was tense. Jane was very suspicious of us and gave us many reasons we should not come to the house.
Jane said the home was in terrible shape and we would not want it. She said it had carpenter ants and multiple leaks and lots of damage. She said that everything needed to be replaced. The deck was completely rotted. The house was a mess. We should look elsewhere.
Notably, she emphasized many times that she would, “not apologize for how she lived.”
How to Diffuse the Situation with Your Tenant-Occupied Ohio Home
Our approach was very simple. We knew the house could be a great deal and wanted to see inside, so we were very understanding on the phone.
The reality is that we had only heard the owner’s side of the story, so we encouraged Jane to tell us her side of things. We were sympathetic to her situation and listened.
We also explained that if we did buy the house, we would not try to terminate her lease right away and we would work with her to find a new home (which was true, and which we ultimately did).
We further explained that we were locals and not some out-of-state corporation with no personal attachments to our region, and we explained that we would absolutely not judge her living conditions, we understood that everyone was different and she should feel no shame in her home.
Real-Life Result with Ohio Tenant By Changing Tone of Communication
It was very clear that nobody had spoken to her in this way in a long time: with sympathy, understanding and a willingness to listen.
Our conversation led to Jane agreeing to a specific date when we could come tour the home. That was a big accomplishment considering the failures of others to do the same thing, and it all came down to simply being kind and sympathetic.
That house tour led to an offer which was accepted, and ultimately a successful closing on the home. We helped Jane transition to a new home, including removing many of her belongings for her, providing $350.00 toward moving expenses, and provided some groceries just to be nice.
The Lesson on Resolving Tenant Objections to Showings
So, what is the lesson for sellers who have a bad relationship with their Ohio tenants, but want to sell their tenant-occupied home:
Obviously, we had the advantage of being a new relationship/fresh face with Jane. For the seller who has had a bad relationship with their tenant for some time, it may seem like a steep uphill battle to change the dynamic and have a smooth sale process.
Consider, however, if instead of continuing to tell the tenant that they are terrible, have a contractual obligation to allow showings, and would be sued if they did not honor that obligation, the seller had tried a different approach (and perhaps, in particularly bad situations even had a partner, spouse or friend be the new face of the direct communications with the tenant):
“Jane, it has been a tough dynamic for us for a while. The reality is that we need to find an owner who can work with you in a better way, so that you can feel like you are in a fair situation. I know that showings can be a burden so how about this, for each showing I will give you $10.00 if you are home during the showing, and for each showing where you temporarily leave the home so it is empty during the showing I will give you $_________[insert cost of a local coffee and sandwich] so you can go to the coffee shop, grab lunch, etc. while the showing takes place. I will make sure that the showings are 30 minutes or less, so you always know they will be quick and you can come right home after. Once we find a buyer who will be better suited as a landlord for you, I will give you $______ when we close.”
Will this approach work 100% of the time? Of course not. Will your tenant raise objections to this approach that you might have to negotiate over? Of course. Will it be painful to offer a financial incentive to a tenant that has been giving you a hard time? Definitely.
However, from several real-life experiences with tenant-occupied homes in Ohio where the landlord and tenant disliked each other and would not accommodate each other, we have seen how the kinder approach, coupled with a very modest monetary incentive for showings, shifted the dynamic to one that was much more constructive and created a clearer path to a sale.
If you are in a bind trying to sell your tenant-occupied property and nothing else has worked, it is worth it to give this approach a shot. If there are problems with the home that you need to address before a sale, for example (e.g. repairs need to be made), just imagine how much easier it will be if you and your tenant are closer to being on the same team.
Rule #2: Understand Key Terms of Your Lease that Relate to the Ohio Home Sale
If you are trying to sell an Ohio tenant-occupied property with an active lease, then there are multiple lease provisions that your lease may contain that can affect your rights, the rights of your tenant(s) and the rights of any potential buyer.
It is very important that you understand these provisions of your lease so that you act within your rights at all times and do not accidentally violate the rights of your tenant(s).
This is not legal advice, and you should always consult with an attorney to understand your legal rights. My discussion here of Rule #2 will focus on some of the provisions I would personally look out for if selling a tenant occupied property in Ohio.
As every lease is different, your lease may or may not contain one or more of the provisions I discuss below, and may contain additional provision that you need to understand in connection with trying to sell your Ohio tenant-occupied property.
Lease Term Length
It is important to understand that unless your lease contains a specific prohibition against selling or gives your tenant an option to buy the house (both of which would be atypical, but you should double check), you can sell a tenant-occupied property in Ohio regardless of when the lease term ends.
Buyers of an Ohio tenant-occupied property will be buying subject to any active lease, meaning they will inherit your position as landlord and all of the rights and obligations contained in the lease itself.
Month-to-Month or Fixed Term Ohio Tenant
You can sell your tenant-occupied house in Ohio regardless of whether the tenant is on a fixed term (e.g. you signed an annual lease with them) or their lease is month-to-month. In either case, the buyer can close on the house and then step into your shoes as the new landlord, subject to your existing lease with the tenant.
Will it be Easier to Sell if the Ohio Lease is either Month-to-Month or Expiring Soon?
Yes. The more flexibility you have as a landlord with respect to your tenant, the more flexibility sellers will perceive that they will have if they buy the home. That makes the deal more attractive to a buyer and better for you when trying to sell.
If the lease is month-to-month rather than for a fixed term, you can typically terminate the lease in Ohio by providing the tenant with a 30-day notice of termination. Make sure you check your local rules or have an attorney check (and you can sometimes find free legal advice hotlines that can point you to answers you need), and make sure the notice is provided to your tenant in the legally prescribed manner.
Similarly, if a fixed-term lease is set to expire on a specific date and you have confirmed that there are no auto-renewal provisions in your lease and that you terminate the lease with the proper notice, the lease will end.
In either case, you will have the ability to show sellers that the lease either can be terminated with only 30 days notice or will end on a specified date, either of which buyers will likely appreciate.
Is it Ever Easier to Sell a Tenant-Occupied Property?
Yes, with a specific type of tenant and to a specific type of buyer.
If you have a good tenant who consistently pays on time, honors their lease obligations and their rent is not very low relative to the market, this can be a strong selling point specifically to investor-buyers.
While investors are a smaller pool of buyers, this is one scenario where you may gain a benefit in terms of the price you can sell your property by keeping a tenant in place while you look for a buyer.
For example, we have purchased properties that came with a tenant on a long-term fixed lease and even paid a little more than we otherwise would have after we did some due diligence and found that (i) the lease was well drafted and reasonably balanced between landlord and tenant, (ii) the tenant paid their rent on time, (iii) the tenant kept the property in good condition, and (iv) rent was below market but not by more than 10%-15%.
Showing and Entry Provisions
The vast majority of leases will have a specific provision sometimes labeled, “Right of Entry,” “Landlord’s Entry,” “Landlord’s Access,” “Right of Inspection,” or something similar, that provides a landlord with specific rights relating to when and how they may enter the property for showings, inspections and investigations.
You want to make sure that you follow the terms of this provision so that you do not violate your tenant’s rights. For example, many of these provisions will specify that the landlord has the right to enter, “upon 24 hours written notice.”
To state the totally obvious, if your lease says you have to provide 24 hours’ written notice before entering for a showing, do not try to enter within less than 24 hours of notifying your tenant if they have not specifically agreed.
In my leases, I always make sure it is clear that “written notice” can be provided by email and even text message. If your lease does not specify what type of “written notice” you are permitted to provide to your tenant, I recommend providing them with a hard copy of your notice and texting and emailing the notice. Check your local rules and check with an attorney in your area to be safe.
Example #2: The Poorly Drafted Ohio Lease Term Clause
In 2020 we purchased a property for cash from a seller with an active lease, where the lease term provision read as follows:
“To have and to hold unto the tenant for the term of one year, with an automatic renewal each year, unless tenant notifies the landlord no later than 60 days before the end of a term.”
This is a horribly drafted lease term from a landlord or buyer perspective. On its face, it gives the tenant total control over when the lease ends, seemingly making it very difficult for a buyer to do anything other than continue the lease with the tenant until the tenant decides they would like to move.
On top of this, there were no clear rent increases built into the lease agreement. Therefore, it was theoretically possible that the tenant could continue to renew each year and have their rent locked in at the same rate perpetually.
When investigating a seller’s tenant-occupied Ohio property for a potential purchase, an educated buyer will ask for a copy of the lease agreement specifically to look for risks like those presented by this particular lease. If a buyer sees that they might not have flexibility with a tenant, their options for how they will use the property become more limited and the property becomes less valuable.
Unfortunately, if you have a lease with a provision like this, the poorly drafted lease will likely affect how you can price your home for sale and can limit the number of interested buyers.
Solution to the Poorly Drafted Ohio Lease
So, what did we do to ultimately solve the problem in connection with purchasing the property?
In this situation, the tenant had been paying their rent on time and was not otherwise problematic. The rent was low relative to market, however, and it of course made the deal less interesting from a buyer’s perspective since the tenant seemingly would have no incentive to pay higher rent, agree to a lease amendment, or to move out and let us renovate.
Upgrades in Exchange for New Lease Agreement
As in most cases, conversation and friendliness lead to understanding more about what someone wants. In speaking with the tenant during our tour of the property, they dropped several hints that they were unhappy with the condition of their rental. They said things such as, “the bathroom is very dated,” “the paint is very old,” “the lighting is bad,” etc.
These were all things we would upgrade anyway if the home was empty.
With that in mind, we asked if the tenant would consider a slightly higher rent through a specific date if we were to upgrade all the things they mentioned (and more). After we explained all of the things we would update and suggested only a modest increase in rent through a specified date, the tenant seemed interested.
The plan, therefore, was to make an exchange with the tenant: we would upgrade their space for them in the ways they wanted in exchange for them first signing an amendment to their lease which (i) extended the lease term to a specific date at a modestly higher rental rate, and (ii) included a termination provision that remedied the problem with their existing lease.
All Cash Offer for Ohio Tenant-Occupied Property with Bad Lease
With the tenant’s interest confirmed, we made an all-cash offer on the property with one contingency being that the tenant had to first sign the lease amendment prior to our quick closing.
After all, if we did not have that amendment signed before closing, the tenant could always change their mind about signing the amendment after we bought the property and we would then be looking at more challenging solutions to the problem (we knew there was a legal solution, but it could be costly and time-consuming).
Lesson for Selling Tenant Occupied Ohio Home with Bad Lease
In our situation described above, the solution was to first gain an understanding of the tenant’s wants to then negotiate how we would satisfy those wants in exchange for an amendment to the lease that addressed our concerns.
While in our case the tenant wanted cosmetic updates to their living space, if you are a seller with a bad lease agreement and you want to try to fix the lease so that the property is more attractive to buyers, the same type of exchange could hold true for your tenants who want other things (e.g. to be allowed to have pets, a better stove or washer/dryer, a reduction in rent, the addition of a roommate to their lease, and so on).
Legal Solution to Selling a Tenant Occupied Ohio Home with Bad Lease
If you do find yourself in a situation like ours, where the lease has some bad provisions that may make it more difficult to sell the Ohio home quickly, it is worth noting that the law in many states (check with an attorney in your state) does not favor this type of lease provision.
In many states, a court may look at the provision in the lease we were confronted with and say something like, ‘unless it is specifically stated in the lease that it was the parties’ intent that the lease continue, “forever,” it will be assumed the parties only intended that there be a specific number of renewals’ (maybe 1 or 2, for example).
In my opinion, the legal option (going to court to have a judge resolve an issue like this) is definitely the last resort.
However, if you find yourself in a situation where you need or want to sell your property fast and have tried to resolve a problem with your lease through reasonable negotiation and cannot reach agreement, it is worth noting that going to court can resolve the matter (albeit at a cost of time, money and stress).
Rule #3: Provide Plenty of Notice to Tenants for Showings in Ohio (and Send Reminders)
There is a theme throughout these rules. Communication (open, frequent, and straightforward) is the key to successful relationships with tenants whether you are trying to sell your house fast for cash or just trying to be successful as a landlord.
Along those lines, while it will seem obvious to many, it is important to note that providing plenty of notice for showings, sending a reminder in the days leading up to the showing, and a confirmation on the day of, can be huge in terms of avoiding hiccups and conflicts with your tenants and potential buyers.
On more than one occasion a tenant’s plans have changed last minute on us and they did not think to let us know, so having reached out ourselves in the days leading up to an appointment has been key.
Reaching out in that way has given us more time than we would otherwise have had to notify anyone else who is affected by the schedule change and to reschedule promptly.
Rule #4: The Last Resort – Create Financial and Other Incentives for Your Ohio Tenant
I call this the last resort because it is really something you should only have to consider as a seller when you have (i) a reasonable request of your tenant that has been ignored/rejected, (ii) a generally unproductive/bad relationship with your tenant, and (iii) nothing else has worked. If you are on good terms with your tenant, it is reasonable to expect your tenant to honor their agreement in the lease with respect to showings without needing to pay them.
Even if you are on bad terms with your tenant, changing your approach can prevent needing to provide financial incentives. In our example described in Rule #1, even though the relationship between landlord and tenant was very bad, creating a financial incentive was not necessary to get the tenant to agree to a showing.
Simply having a fresh face (my spouse and me in the Rule #1 example, but it could be a family member or friend of a seller as well) step in and be kind, listen to the tenant and treat the tenant respectfully was sufficient to gain the necessary cooperation to get the deal done.
The Benefits of Financial Incentives When Selling a Tenant-Occupied Ohio Home
However, if you (i) do have a combative landlord-tenant relationship, (ii) are trying to sell your Ohio house quickly, and (iii) have tried everything else to get your tenant’s cooperation and nothing has worked, financial incentives (even modest ones) can provide a host of benefits including:
(a) Getting your tenant to agree to showings and showing times when they might otherwise refuse;
(b) Getting your tenant to clean the house prior to showings and be friendly to potential buyers;
(c) Getting your tenant to move out sooner than the lease requires; and
(d) Generally changing the landlord-tenant dynamic to one of cooperation and aligned goals.
Sell Ohio Home Quickly by Aligning Your and Your Tenant’s Goals with Financial Incentives
In most instances it would not be natural for your tenant to have any particular desire to help you speed up a sale of your home, and the sale process will add some stress to your tenant’s life. Aligning your and your tenant’s goals with financial incentives can help bridge the gap between you and your tenant (or at least remove some of the disincentives from your tenant’s perspective).
For example, consider how one simple financial incentive can shift the dynamic between landlord and tenant. Again, this is only if you have reached a point where all other attempts at being reasonable and simply asking your tenant to abide by the lease agreement have not succeeded, and the tenant is acting in such a way that could seriously affect your ability to sell your home:
“We [the landlord] will pay you [the tenant] $_____________ [e.g. amount equal to slightly more than one month of rent] on the day we close on the sale.”
How Much to Offer Ohio Tenant for a Smoother Sale Process
There is no golden rule about the amount to offer here, and it will be an “art” to determine what amount will be sufficiently motivating for your tenant (and reasonable for you).
While by no means a magic number, in practice I have seen that offering sums in a range from approximately one-third of the monthly rent to two full months worth of rent have changed the dynamic between landlord and tenant to one that is far more constructive, with the tenant subsequently having a reason to want the sale to occur and acting accordingly with respect to showings.
The amount you offer will depend on several factors:
(i) how badly the tenant’s behavior is affecting a potential sale;
(ii) how reasonable/logical the tenant will be in response to a financial incentive;
(iii) how badly you need to sell; and
(iv) whether or not you will be asking the tenant to move out in connection with the sale (which would necessarily increase the amount the tenant would expect to receive to deal with the hassle of moving, moving expenses, needing to provide a new landlord with a security deposit and first month’s rent, etc.).
Conclusion: How to Sell a Tenant-Occupied Home in Ohio
Selling a tenant-occupied house in Ohio, and particularly selling a tenant-occupied home quickly, is not an easy task. You and your tenant have very different viewpoints regarding a sale, with the tenant reasonably concerned about the changes a sale will bring, whether they will need to move, whether the new landlord will be better or worse, whether their rent will change, and so on.
However, a reasonable approach to the sale process, an acknowledgement and attempt to address your tenant’s concerns, incentives when appropriate and a solid buyer with experience in managing tenants through a sale process can all come together to dramatically improve the likelihood of a successful outcome.
