Deciding to sell a house can be complex, and adding existing tenants introduces a unique set of considerations. Whether you’re an accidental landlord or a seasoned investor, selling a house with tenants requires careful planning, adherence to legal obligations, and open communication.
This guide explores your options, highlighting the pros and cons, and shedding light on the cost of selling a house and the processes involved.
What Are My Options When Selling a House with Tenants
When you choose to sell a house that’s currently tenanted, you generally have two primary pathways:
- Sell the House with Tenants in Place (Tenant-Occupied Sale): This means the new owner will inherit the existing lease agreement.
- Sell the House Vacant (Vacant Possession): This requires the tenants to vacate the property before settlement.
Let’s delve into each option.
Option 1: Selling the House with Tenants in Place
This approach means the tenancy agreement transfers to the new owner upon settlement. This can be attractive for property investors seeking immediate income.
Pros of Selling a House with Tenants in Place
- Continued Rental Income: You maintain rental income, which is crucial for covering mortgage repayments and other expenses while the property is on the market.
- Appeals to Investors: A property with reliable, existing tenants is highly appealing to investors, eliminating their need to find new tenants.
- Reduced Vacancy Costs: You avoid costs like utilities, insurance, and security that come with a vacant property
- Less Pressure to Renovate: Investors may be less concerned about minor cosmetic imperfections if the tenant is a good payer and the lease is secure, potentially reducing your upfront cost of selling a house.
Cons of Selling a House with Tenants in Place
- Limited Buyer Pool: This option primarily appeals to investors, narrowing your market and potentially impacting the sale price.
- Tenant Cooperation is Key: You have less control over the property’s presentation. Tenant tidiness and cooperation during inspections can significantly impact buyer perception.
- Inspection Challenges: Arranging inspections requires adhering to notice periods (e.g., 24-hour written notice) and making “reasonable efforts” to agree on times with tenants, which can be disruptive for them.
- Legal Obligations: The new owner must honour the existing lease agreement, meaning they cannot simply ask tenants to leave if a fixed-term lease is in place, unless there’s a breach or mutual agreement.
Important Considerations for Tenant-Occupied Sales
- Communication is Paramount: Inform your tenants of your intention to sell early. Discuss the sale process, including inspection schedules.
- Incentives for Cooperation: Consider offering incentives like a temporary rent reduction, a small gift after inspections, or even a week’s free rent upon settlement to encourage cooperation.
- Professional Photography: Ensure professional photos are taken, ideally without tenant possessions. In some states, written consent is required for photos showing their belongings.
- Notice of Attornment: Upon sale, a “Notice of Attornment” is typically issued to the tenant, formally advising them of the change in ownership and instructing them on where to direct future rent payments.
Option 2: Selling the House Vacant
This option involves ending the tenancy agreement and having tenants vacate before settlement. This often broadens your buyer pool to include owner-occupiers.
Pros of Selling a House Vacant
- Wider Buyer Pool: A vacant property appeals to a larger market, including owner-occupiers who want to move in or renovate immediately. This can lead to a higher sale price.
- Control Over Presentation: You have complete control to clean, paint, stage, and undertake repairs to maximise appeal and value without tenant coordination.
- Easier Inspections: You can schedule open homes and private inspections more flexibly.
- Potential for Higher Sale Price: A well-presented, vacant property often attracts more competition and can achieve a higher sale price.
Cons of Selling a House Vacant
- Loss of Rental Income: Once tenants vacate, you lose rental income and are responsible for all property expenses (mortgage, rates, utilities) until the sale settles. This contributes to the overall cost of selling a house.
- Vacancy Period: There’s no guarantee how long the property will sit vacant, increasing your holding costs.
- Tenant Notice Periods: You must adhere to strict legal notice periods to terminate a tenancy, which vary by state and lease type. For example:
| State/Territory | Notice Period Required |
| New South Wales (NSW) | 30 days for a fixed-term agreement, 90 days for a periodic agreement |
| Queensland (QLD) | 4 weeks written notice |
| Victoria (VIC) | 60 days written notice |
| Western Australia (WA) | 30 days written notice |
| Northern Territory (NT) | 42 days written notice |
| Tasmania (TAS) | 28 days written notice |
| South Australia (SA) | 60 days written notice |
Always check your specific state’s residential tenancy laws.
- Make-Good Costs: You may incur costs for cleaning, repairs, and minor renovations once tenants vacate to prepare the property for sale. These fees and charges when selling a house can accumulate.
The Process of Selling a House with Tenants
Regardless of your chosen option, the general steps for how to sell a house remain similar, with additional considerations for tenants:
1. Consult with Your Property Manager and Agent
They offer invaluable advice on tenant relationships, leases, and state-specific regulations.
2. Understand Your Lease Agreement
Review your lease to determine if it’s fixed-term or periodic, and any clauses regarding sale or entry.
3. Communicate with Your Tenants
Inform them of your plans early, explain the process, and address their concerns to encourage cooperation.
4. Prepare the Property
- Tenant-occupied sales: Focus on maintaining cleanliness. Professional photography is key; consider incentives for tenants to declutter.
- Vacant sales: Once tenants vacate, undertake necessary repairs, cleaning, and staging.
5. Marketing the Property
Your agent will develop a marketing strategy, including professional photography and online listings. Marketing costs can range from hundreds to several thousand dollars.
6. Inspections and Open Homes
- Tenant-occupied: Schedule inspections with appropriate notice (usually 24 hours). Consider limited, set viewing times.
- Vacant: You have full flexibility for scheduling.
7. Negotiation and Sale
Your agent handles negotiations. If selling with tenants, clearly communicate existing lease terms to buyers.
8. Legal and Financial Settlement
Engage a conveyancer or solicitor to manage the legal transfer of ownership and documentation.
How Much Does It Cost to Sell a House?
The cost of selling a house can be substantial, with tenants influencing some figures. Here are the common fees and charges when selling a house in Australia:
- Real Estate Agent Commission: Often the largest cost, ranging from 2% to 2.5% of the sale price.
- Marketing and Advertising Costs: You should generally expect to pay 0.5% to 1% of your property’s price. These cover professional photography, online listings, and signage.
- Conveyancer or Solicitor Fees: Legal fees for ownership transfer, typically $500 to $1,100.
- Mortgage Discharge Fees: If you have a mortgage, lenders charge a fee to discharge the loan. Be aware of potential “break fees” for fixed-rate loans.
- Capital Gains Tax (CGT): If the property is an investment and you make a profit, you may be liable for CGT. Seek tax advice.
- Repairs and Renovations: Highly variable. More investment might be made in a vacant sale. Essential repairs are always your responsibility.
- Moving Costs: Factor in removalist costs if you’re also moving.
Ready to Sell? Partner with Experts Who Know the Wright Way
Selling a tenanted property can be a smooth process with the right approach and expert guidance. At Wright Way Realty, we specialise in navigating these complexities for property owners across Australia. Our experienced team provides tailored advice and comprehensive services to ensure a successful sale, whether your property is tenant-occupied or vacant. We’re here to help you achieve the best possible outcome with transparency and ease.
Ready to sell your property the right way? Contact Wright Way Realty today and let us guide you to a seamless sale.
