When The Only Good Tenant Is A Gone Tenant

By
Real Estate Agent with Evers & Company Real Estate, Inc. AB95346

 Like many cities, Washington, DC has landlord-tenant laws that really do protect a tenant's rights.  It is extremely difficult to get rid of a tenant who is paying rent, even after the lease expires.  If the tenant is a total deadbeat, it is very difficult to evict.

In addition to making evictions a major challenge, the law protects tenants whose homes are for sale.  When an offer comes in on a tenant occupied house or apartment, the seller cannot sell until the tenant "rejects" the right of first refusal.  And the tenants, even if they don't have two cents to rub together, have a bunch of months to make up their minds.  

I once acted as a buyer broker for a tenant who held up the owner of his Logan Circle townhouse for about four years, and during that time, the value dropped from something in the low $300's to the price the tenant matched of $185,000.  At settlement, it was pretty clear that the seller and his agent had little love lost for the tenant/purchaser.  And it was so unpleasant that, at one point, I excused myself, went into the ladies room and had a huge crying jag.  But it did eventually settle. 

So what's a poor landlord to do?

A tenant is clearly the elephant in the living room in any listing, but to the seller, the tenant is generating income. 

In this market, it's hard to tell how long a place will take to sell.  With rents being as high as they are, most landlords are reluctant to lose the income that the tenant provides.  And who can blame them?

Still, having the place tenant occupied greatly reduces the exposure to the market on two important counts.  First, most tenants place restrictions on when and how their homes may be shown.  Forget a lockbox on the door and come on by.  They often want 24-hours notice and may even insist on being present at all showings.  Not good.  Second, many buyers' agents here in DC are reluctant to even show a tenant occupied listing.  We know that if our buyer loves they place, it could be a long and difficult road to the settlement table - if it even gets that far.  

A few weeks ago, I wrote an offer on a beautiful place that has a tenant.  We don't think he's going to match the offer, but we may not know for sure until springtime.  It's been on the market for over a hear with two different agents, beginning with an asking price of almost $1.1 when the market was hot, to $899,000 as things cooled off.

And I can't help but wonder - is the amount of rent a tenant is paying is a false economy? 

 

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Topic:
Real Estate Sales and Marketing
Location:
District of Columbia District of Columbia County Washington
Tags:
landlord tenant isues
tenant ocuupied listings
washington
dc landlord tenant laws
patricia kennedy

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Rainmaker
92,120
Lynn Johnson
Coldwell Banker Home Connection - Owatonna, MN
Owatonna, MN Real Estate

Hi Patricia,

That certainly is a difficult decision that more sellers will be facing as the market continues it's change.  It's always tough to advise the cash strapped seller that a tenant may not be the best situation, because it can effectively take their home out of market consideration for the very reasons you stated.  Unfortunately, it's going to continue to be a part of the many challenges that we, as real estate professionals, face when marketing and selling a home.  Good luck.

Jan 30, 2008 11:11 AM #1
Rainer
10,175
Michele Samph
Coldwell Banker Heritage - Quakertown, PA
Oh my Gosh Patricia. This is not what I wanted to hear. I just bought an investment property and will hopefully rent it early Spring. I am a new landlord and will have much to learn.
Jan 30, 2008 11:13 AM #2
Rainmaker
326,047
Jeff R. Geoghan
Coldwell Banker Select Professionals - Lancaster, PA
REALTOR, Marketing VP & Real Estate Agent Coach
We don't have a right-of-refusal law here in Lancaster County - I can't imagine how that must foul up things for a seller.  There's no easy way out.  
Jan 30, 2008 11:13 AM #3
Rainer
40,137
Endea Thibodeaux
Auction2Sell, LLC - 240-381-6653 - Lanham, MD
CDPE, CLHMS, RECS, Real Estate Auctions - DC, MD, & PA

DC has the most frustrating tenant frendly laws!  I once sold a condo with an elderly tenant in it to a client for an investment.  If you think regular tenants can tie up your deals, just be over 65 it is even worse.

The elderly tenant was paying just enough to cover my clients investment but she could not put her out as long as she paid on time.  We joked and said she is going to have to die in order for you to get rid of her.

Years later she called me and told me the lady passed away!  Sadly enough that really was the only way!

Jan 30, 2008 11:18 AM #4
Rainer
99,121
Gregory Maley
WaveHouse Properties, LLC - Wilmington, NC
REALTOR, GRI, CBR, SHS, e-PRO
It would be pretty hard to have any love for someone who tied you up in a property for four years and cost you more than $100,000 in equity.  Some people do know how to work the system.  I hope you weren't the one educating him ;-)
Jan 30, 2008 12:05 PM #5
Rainer
152,832
Ken Montville
RE/MAX United Real Estate - College Park, MD
The MD Suburbs of DC

DC landlord/tenant laws are a great example of government run amok.  There seems to be this fear (somewhat justified) that if you can remove your tenant at the end of their lease that a developer or speculator will come in and do a minor rehab and jack up future rents or flip the property putting some poor schmoe out on the street to panhandle and sell flowers on street corners.

In the meantime, property owners seem to have relinquished all their rights in favor of ultra liberal political tendencies.  Don't get me wrong.  I'm not advocating homelessness or putting the elderly out on the street but there needs to be a balance.

Sure. Right of first refusal.  But for a limited period of time. If the tenant can qualify and wants to buy the place, great. If not, let the owner sell it.

Jan 30, 2008 06:19 PM #6
Ambassador
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Barbara-Jo Roberts Berberi & Corinna Birgit Cromartie
Charles Rutenberg Realty - Palm Harbor, FL
Palm Harbor & Dunedin FL Residential Real Estate
Patricia - I also tend to show everything else prior to showing one that has a tenant in it - it is just one more thing to have to deal with that could delay a closing. great post!
Jan 31, 2008 10:23 AM #7
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Patricia Kennedy

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