Selling an apartment in NYC with existing tenants in place can be much more challenging than selling a vacant apartment. This is especially so if you’re selling a co-op or a single-family home which is not catering to an investor buyer base, as the buyer will likely be an owner-occupant who won’t want a tenant to be in place post-closing.
If you’re selling a condo or a multifamily property, having an existing tenant can actually be beneficial. This is because the majority of investor buyers would ideally like to have a tenant in-place as quickly as possible after closing. In some cases, investors specifically look for units with tenants in place in order to minimize the risk of vacancy (and zero cash flow generation) after closing.
Regardless of what property type you are selling, the best case scenario is to have an existing tenant on a month-to-month lease.
That way, you can effectively market your home to both investors who’d like certainty of cash flow and owner-occupants who’d like to move in right after closing. Investors will like the idea of carrying over the tenant post-closing, and owner-occupants will appreciate the flexibility of being able to terminate the lease so that they can take occupancy of the property right away.
It’s also equally valuable to have a tenant in place, provided that the lease has an early-termination clause in the event of a sale. Once again, the option value here is highly favorable to the seller’s marketing efforts since having the tenant in place with an early termination clause would still encourage owner-occupant buyers to purchase the property.
The key disadvantage of having a tenant in place, regardless of the lease terms, is the fact that it’s significantly more difficult to accommodate private showing requests and hold open houses. Another disadvantage is the possibility that the tenant keeps the unit in an unsightly condition, perhaps even so bad to the extent that it’s not possible to take professional photos.
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It’s much easier to sell a vacant apartment. This is because access to the unit is less restrictive and there’s generally more showing availability compared to if a tenant is in place. Coordinating a private showing or an open house with a tenant in place requires the extra step of contacting the tenant and waiting to hear back.
Because tenants don’t have any skin in the game when it comes to a sale, many tenants are incredibly unresponsive and often require multiple reminders when it comes to requesting approval for a private showing.
It gets even more complicated if the buyer has a change of schedule after the tenant already approved a showing request, as the listing agent will have to wait for the tenant to respond again before confirming the new appointment time.
If the lease does not clearly lay out the notice period for showings, a tenant could make unreasonable demands such as requiring 3 or even 5 days’ notice for any viewings. This would dissuade the majority of buyers from viewing the unit in the first place. In the case of overseas investors who travel to NYC at short notice to view apartments, an unreasonable notice period would make it practically impossible to accommodate these types of showing requests.
Furthermore, most investors will not make any extra effort to accommodate a showing for a listing with a tenant who is making scheduling difficult. A foreign investor usually flies in, views whatever properties are available to schedule on short notice, and then decides to submit an offer on one or more of the units they viewed. There is rarely any emotional attachment for investors to any particular listing that would make them patient enough to wait around for a tenant to confirm an appointment.
If a tenant is really uncooperative or resentful, they could essentially sabotage the entire sale process by routinely declining requests for the listing agent to hold general open houses on Sunday. Or the tenant could demand that any open house be ‘by appointment only.’ Any listing agent in NYC will tell you that not being able to hold general open houses is a significant obstacle to any sale, as it essentially boxes out walk-in buyers.
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Should a Seller Wait Until the Tenant Has Vacated Before Listing?
It depends. If your tenant is highly uncooperative or keeps the apartment in an unsightly condition, it may be advisable to wait for them to vacate before listing. This is because the condition of the apartment would make it impossible to take professional photos, and buyers who do view the property may lose interest in the unit simply because it’s messy or dirty.
If your tenant is uncooperative, they could refuse to provide access altogether.
We’ve actually heard of a situation where a tenant simply stopped responding to all showing requests, and this made it impossible to show the unit at all.
