We encounter plenty of landlords that are eager to sell their occupied rental property, but do not know how to proceed with tenants in place. Luckily, the laws in Maryland surrounding the sale of real estate with tenants is very straight forward..
Tenant-Landlord laws are normally designed to both protect the tenants and give the homeowner options that will not impede on the existing contract.
The first step is something that is not typical in a real estate transaction. In Carroll County, and all of Maryland, you must give your tenant the "First right of refusal" before selling to anyone else. That means you must offer the legal resident of a home an opportunity to purchase at a fair market value. If the tenant indicates that they want to purchase, then they must take immediate action in acquiring funding and show an ability to purchase a home, as with an approval letter or something similar.
If you wish to sell the home without "spooking" the tenant, this is an understandable predicament. Our advice is to simply ask them if they "would be interested in buying if you sold it." This is a great way to ease into the possibility of selling without causing too much consternation over the change in ownership.
If the tenant is not interested in buying (or is not able to perform), the next step to selling the home is nothing out of the ordinary - the homeowner and buyer must agree to a fair purchase price and the buyer must be made aware of the current lease terms. Often times, the buyer will determine a purchase price with this lease as the foremost consideration in determining the value of the home.
This is also how we evaluate rental properties at Carroll Home Buyers, so the ratio of purchase price to rent amount must be in line with other rental properties in the area.
A general rule of thumb is the monthly rent should be less than 1.5% of the purchase price. For example, if a tenant is paying $1000/month in rent, the buyer will want to pay less than $150,000. However, that is assuming that the buyer would be continuing to keep the property as a rental. This is not always the case, so we take into account every long term investment strategy, in addition to the rent potential.
The question of squatters and their rights to the property has been one of heated debate in recent years. This is undoubtedly due to the increase in homelessness, and a general increase in the awareness that such laws and regulations exist. We do buy properties with squatters, but the process is different for each case. Often, the rights of a squatter to the home they are inhabiting comes down to the length of time they have been there, and if their presence is known by the owner. To put it plainly, if you know that squatters are living in your house, you must take action with the local court system immediately.
Most squatters only have rights to a home if they have been occupying it for at least 10 years, have maintained the property (cutting grass, interior and exterior upkeep, etc), and have made their presence known to the owner. That does not mean that they need to tell you verbally or in writing, only that their presence is obvious from anyone who would have visited the property or lives nearby.
It should be noted that when we buy properties with tenants, we are not looking to displace the tenant, or any occupants for that matter. If we deem that the rent amount is too low, we address that immediately and let the tenant know of our plans. If we think the property is not well suited for a rental and has higher potential in another form, we let the tenant know and try to help them find another place of residence. We will even help the tenant move and give them the ability to move forward with their life.
"I didn't know what to expect, but these are just honest, hardworking people and I trusted them immediately."
– Robert H.
"Selling a home is a big deal. They made each step incredibly easy on me. They even helped me move a few things out of the house and into my new place!"
– Kathy R.
Send us the property address and any relevant information, then we will reach out with a fair cash offer within 24 hours.