Why aren’t you waiting until the tenant leaves? You’re really going to list it for sale with the tenant still there?
Are you lazy? Cheap? Uninformed? Or all of the above?
Just listen to my story from this past weekend, and use it as a cautionary tale. You’ll say “Oh, my tenant isn’t like that,” but do you really ever know for sure?
“One month’s rent.”
That’s what I told a prospective seller on the phone last week when she asked me, “How much would I lose if I did it your way?”
Isn’t it: the only way?
Let me back it up…
She had her unit on the market for two months, unsold, which in itself raises a red flag. The listing expired after 60 days, and she called me to ask what I think she did wrong, and what she could have done differently.
Sure, price was an issue, as it most certainly always is in Toronto, when you’re on the market for two months. But the bigger issue was that this landlord/owner was trying to sell the condo with the tenant still living there.
There were no photos of the property on the MLS listing, which is about single-easiest mistake a seller can correct, but is also among the most common, and the seller told me, “The tenant said I couldn’t take photos of the unit because her personal property was inside.”
Geez. A budding law student, perhaps?
Regardless of what you think is fair, you’d be nuts as a condo owner to not take photos of YOUR condo when you want to list it for sale on MLS. We can just photo-shop out the DVD Box-Set of “Girls”…
So along with the high price and lack of photos on MLS, came the fact that the tenant demanded, as is her right, 24 hours notice in WRITING, to show the condo.
And this is when I simply said to this lady, “You have to get rid of the tenant, and sell the condo after she’s vacated.”
Sounds simple, right?
You might even say it sounds……obvious?
But this lady, who was very kind, very personable, and seemed very smart, absolutely refused to “lose” a month’s rent.
And she freaked when I told her, “Who knows it could be two months rent, in the end.”
I told her that she was dealing with an asset of major value, and in no way should she sell it unless the price of the asset is maximized to the fullest.
If the theory doesn’t move you, then how about the numbers. The condo is worth about $380,000, and rents for $1850/month. Let’s say the tenant vacates on March 31st. You get painters in on the 1st of April, followed by stagers on the 2nd, and then cleaners on the 3rd. You list the property for sale on the 4th, and if you can get it sold in two weeks (I told her I could), and obtain a quick closing (vacant properties often close in less than 30 days), you end up “losing” about 1 1/2 month’s rent – $2,775, and you’ve spent $1,500 on staging, and $200 on cleaning.
That’s the best $4,500 you’ll ever spend. And you didn’t really “spend” the money that we’re counting in lost rent.
Alternatively, you can continue to let the unit rot on the market, show poorly, and have a tenant cause you issues. You can easily end up getting $25,000 less for the condo because of this.
If you think I’m exaggerating, or you don’t believe in the value of staging, or both – just listen to what I witnessed on the weekend.
I wanted to show a Yonge/Eglinton condo on Saturday afternoon at 12:00pm, and because the property was tenanted, I made a point of making the viewing request on Wednesday. I called back again on Thursday, and again on Friday; each and every time, never getting a confirmation.
I talked to the listing agent who said, “This tenant is a disaster, and he never gets back to us. He seems to think that if he just doesn’t get back to us, then we’ll go away.”
Yeah, that’s pretty common among tenants! And most of the time, it works.
So you have all these buyers who want to view the property, and all these buyer agents trying to get in, but it’s not uncommon for a problem tenant to cause 80% of showings to fall through.
And when 80% of showings fall through, it not only means there’s 80% less chance of an offer coming in on the property, but also that the property sits on the market longer, and the seller’s leverage decreases with every passing day.
The listing agent for this condo was able to get me an appointment (I was very persistent), and at 12pm on Saturday we headed over for a look.
I put the key in the lock and turned it, but it was hollow – and by that I mean that the door was unlocked. Never a good sign…
I opened the front door, and to quote Jerry Seinfeld, “like a punch in the face,” I was instantly hit with the wicked stench of beer and cigarettes, that was so incredibly pungent, that I think it’s still in my hair.
“Whooooah,” I said as I ducked back from the door, trying to let the stank go over my head. Of course, my clients smelled it was well, and hands immediately were raised to cover noses.
The unit was pitch-black, which was odd for 12pm, but it turns out that all the shades were drawn in the living room.
I turned on a light, and saw about ten cases of beer bottles stacked up inside the foyer, and the entire kitchen counter was lined with stale beer bottles. But not just any stale beer bottles – I mean the ones that have five dirty cigarette butts in the bottom.
I’m not a smoker, and I never have been. In fact, I am physically repulsed by the smell of cigarette smoke.
But do you know what’s an even worse smell than cigarette smoke? How about cigarette butts that have been marinating in the backwash of somebody’s beer bottle for 48 hours?
This place was worse than the worst dorm room you’ve ever seen.
And all this was just from the foyer.
I took two steps inside, and that’s when I saw a foot hanging off the couch.
“Hello?” I said, somewhat afraid of what might come next.
I moved further into the hallway, and finally laid eyes on a 20-something guy, passed out on the couch, in his underwear, surrounded by ashtrays, empty liquor bottles, and of course – the cigs marinating in booze.
“HELLO,” I said again, hoping to wake the dead, but this guy was passed out to the point where we could have reenacted the events that likely took place in that condo the night before, and it wouldn’t have woken him up.
I laughed, shook my head, and said to my clients, “Let’s get out of this place.”
A contrarian might suggest, “Well wouldn’t that have been a great opportunity to get a deal? To pick up a unit that shows poorly for less than fair market value?”
Yes, it would have been. I’d agree with that, however my clients were just in the building to get a look at any unit, and this wasn’t really a candidate for us. So I’m not going to suggest that I was influenced by a unit that didn’t show well.
But what about the rest of the market? What about the rest of the buyer pool?
How many buyers would have gone in there and looked around at the “potential?” Some, sure, but not most. Not even close.
And keep in mind – how hard it was to even get into this unit in the first place! So now you’re excluding 80% of potential viewers, and the 20% who do get inside are likely going to walk right out.
This isn’t how to sell your largest asset, and I refuse to accept anything otherwise.
Some landlords will say, “My tenant isn’t like that! My tenant is clean and respectful!” That may be true, but the 24 hours notice still pushes some buyers and agents away (ie. when a viewing has to be today), and even the nicest most respectful tenants still cancel showings.
Tenants also stay home during showings more often than not, and many buyers feel uncomfortable viewing a property when the occupant is sitting on the couch! They don’t spend as much time in the unit, and never consider it seriously.
Recall the property I mentioned in Riverdale two weeks ago, where the tenant was home, and would not stop talking about all the problems in the house! She sat upstairs, under the guise of being quiet and out of the way (the listing agent conducting the open house was on the main floor), but every single person that came through the third floor got her unsolicited and uncut opinion of the house.
The house sold for less than most agents thought it would have, and perhaps this was a contributing factor.
A client of mine, who ran into the Chatty Cathy at the open house, said, “If I ever had a tenant, I’d pay them up to $10K to leave for 5 days if necessary.”
There’s a man that understands how to get the most out of your $1 Million asset!
Time and time again, I see properties listed on MLS, tenanted, with no photos, severe restrictions on viewings (one recent house had viewings only Tues/Thurs from 1-3pm; as if that works for most buyers!), and I wonder how somebody smart enough to own the property in the first place, could be clueless enough to suppress the value.
Will people ever learn?