How to Sell a House With Tenants Living in It

Can you sell a house with tenants living in it?

Yes. You can sell a rental at any time, with tenants in place. What you usually can't do is cancel their lease just because you are selling.

Nolo notes that most states let tenants stay after a sale until the lease or rental agreement runs out. The buyer steps into your shoes as landlord. That shapes who will buy, how fast, and at what price.

Landlord-tenant law is very local. State law sets the base, and many cities add their own rules. Check your state guide and talk to a local real estate attorney before you send any notice.

What happens to the lease when the house is sold?

In most states, the lease survives the sale. The buyer takes the property subject to the lease and must honor its rent, terms and end date.

What that means in practice:

• Fixed-term lease: The tenant can generally stay until the lease ends, at the same rent.
• Month-to-month: The tenancy continues, but the owner (you or the buyer) can usually end it with proper notice, where local law allows.
• Lease clause about sale: Some leases say the landlord can end the lease if the property is sold. Whether that clause is enforceable depends on state and local law, so have an attorney read it.

What are your options for selling a rented house?

You have four main paths. The right one depends on your lease dates, your tenant, and how fast you need to sell.

Owner-occupant buyers usually want the house empty. Investors often want the opposite: a tenant who already pays rent. If your tenant is reliable, selling to an investor can be the simplest route.

How much notice do you have to give a tenant?

It depends on your state, your city, the type of tenancy, and how long the tenant has lived there. Here are two examples of how different the rules can be.

California. To end a month-to-month tenancy, Civil Code Section 1946.1 requires 60 days' notice if the tenant has lived there a year or more, and 30 days if less than a year. There is a narrow 30-day option when a separately sellable unit is sold to a person who will live in it for at least a year, escrow is open, and other conditions are met. On top of that, the Tenant Protection Act, Civil Code Section 1946.2, requires a "just cause" to end many tenancies of 12 months or more. Some no-fault reasons, such as an owner moving in, also require relocation help equal to one month's rent. Some homes are exempt, and many cities have stricter rules.

New York. Real Property Law Section 226-c requires written notice before a landlord declines to renew. The notice is 30 days if the tenant has been there under a year, 60 days for one to two years, and 90 days for two years or more. Rent-stabilized apartments have separate, stronger protections.

Selling the house is not, by itself, a legal reason to evict in many places. Never try to force a tenant out by changing locks, removing belongings, or shutting off utilities.

Can you show the house while tenants live there?

Usually yes, with proper notice. Most states require reasonable advance notice before a landlord enters, and many set a specific time.

In California, Civil Code Section 1954 presumes 24 hours to be reasonable notice, and entry must be during normal business hours. For showings to buyers, the landlord can give notice by phone or in person if it first told the tenant in writing, within the past 120 days, that the property is for sale.

Tips that make showings go better:

1. Tell the tenant about the sale early, in writing.
2. Group showings into a few set windows each week.
3. Offer a rent credit or cleaning help in exchange for cooperation.
4. Consider a sale that needs only one walkthrough, like an investor sale.

What is cash for keys, and when does it make sense?

Cash for keys is a voluntary agreement where you pay the tenant to move out by a set date and leave the place in agreed condition. The tenant can always say no.

It can make sense when you need the house empty sooner than the lease or notice rules allow, or when an eviction would cost more and take longer. A good agreement is in writing and covers:

• The move-out date and time
• The amount and when it gets paid (usually when keys are handed over)
• The condition the home must be left in
• Return of the security deposit under your state's rules
• What happens if the tenant does not move by the date

Some cities regulate these deals. In San Francisco, Section 37.9E requires landlords to give tenants a written disclosure before buyout talks and lets tenants cancel a buyout agreement within 45 days of signing. Check your city's rules, and use an attorney to draft the agreement.

Example: A tenant has 8 months left on a lease. The buyer wants the house empty. You offer $3,000 plus the full deposit back if the tenant moves out within 45 days and leaves the house broom-clean. If the tenant agrees, both sides sign before anyone starts packing.

What happens to the security deposit when you sell?

The security deposit usually moves to the buyer at closing, or goes back to the tenant. State law sets how this must be done and who is liable after the sale.

• California: Under Civil Code Section 1950.5, the deposit must be transferred to the new owner or returned, and the tenant must be notified.
• New York: The Attorney General's tenant guide says the landlord must transfer deposits to the new owner within five days or return them, and notify tenants of the new owner's name and address by registered or certified mail.
• Texas: Under Property Code Section 92.105, the new owner is liable for returning deposits from the date of purchase. The seller stays liable until the buyer receives the deposit or takes on that duty, and gives the tenant a signed statement with the exact amount.

Your title or escrow company can show the deposit as a credit to the buyer on the closing statement.

Do investors buy houses with tenants in them?

Yes. Many investors buy rentals specifically because a tenant is already there and paying. Others buy occupied houses with problem tenants and handle the move-out themselves, but they price in that time and risk.

What an investor will want to see:

• A copy of every lease and any written changes
• A rent roll: rent amount, due date, and payment history
• Security deposit amounts
• Any notices you have sent or received
• Known repair issues

Expect an investor offer to be lower than what an empty, repaired house would sell for to an owner-occupant. Many investors start from an industry rule of thumb called the 70% rule: about 70% of the after-repair value minus repairs. A rental with a good tenant and solid rent may be valued partly on its income. Try your numbers in the cash offer calculator, and read how cash buyers calculate offers.

Cash Offer Desk is one buyer you can ask. It makes written as-is cash offers in the areas where it buys and is free for sellers. Get offers from other local investors too. See how it works.

Ask every buyer, including Cash Offer Desk, "Are you buying this house yourself, or assigning the contract?" Some are wholesalers who sign a contract and sell it to another investor. Read what real estate wholesaling is.

What if your tenant has a Section 8 voucher?

The housing assistance contract does not simply end because you sell. Under HUD's Housing Assistance Payments contract, the owner can't assign the contract to a new owner without the housing agency's prior written consent, and the new owner must agree to be bound by it.

Call your local housing authority as soon as you decide to sell. Ask what the buyer needs to submit and how long approval takes, so rent payments don't stop after closing.

When is listing with an agent the better choice?

Listing can bring more money if the lease ends soon, the house is in good shape, and you can wait for it to go vacant. An owner-occupant buyer will often pay more for an empty, move-in-ready home than an investor will pay for an occupied one.

A cash sale with the tenant in place tends to win when the tenant won't cooperate with showings, the house needs work, or you want out of being a landlord now. Compare your net under both paths in cash offer vs. listing with an agent.