Showing a listed property with renters

 Courtesy: Postmedia News 

When it comes time to show your home to potential buyers, you will likely have it in the best possible shape. Perhaps you sent the kids to their grandparents, or left your yappy dog with a neighbour during viewings. However, if you are selling a rental property, you can't ask the tenants to ship out their kids or pets every time you give them 24-hours' notice that a potential buyer will come knocking.

Real estate agents and mortgage professionals say there are pros and cons when it comes to selling with sitting tenants.

"I think it is definitely a con," says Teresa Lorusso, sales representative with Freeman Real Estate. "If they're being inconvenienced because people are coming in and out, tenants can sometimes be difficult. Also, the house is generally not in show-like quality."

However, with good tenants, it can be a different story.

"It depends on the tenants. If you are selling to people who want to keep the tenants -- as long as (the tenants) are not destructive slobs -- it's a good idea (to show the place with them in it)," says Laurin Jeffrey, a real estate agent with Century 21 Regal Realty. "If you've got tenants who are leaving soon, and you're selling to people who want to live in it, then you may want to wait until they move out (before marketing the property)."

If you are selling the property as an investment rather than to an owner-occupier, having existing tenants will affect the buyer's financing negotiations.

"If that tenant is going to stay there, (the lender) is going to want to see a lease that the tenants have signed to make sure that there definitely is an income stream coming in," says Anne Marie Froud, a mortgage agent with Invis. "If there isn't, then they have to qualify the person on their own income." Froud says lenders need at least 20 per cent down and will then allow a portion of the rental income to be used when calculating a borrower's income stream -- usually between 50 and 80 per cent. If there are no tenants, then the lender may use market rents for the income calculation.

"It depends on the lender, whether they will or will not use that market rent," Froud says. "Some will still let you use the 80 or 50 per cent, but others will say, 'No, we want it rented out before.'"

Froud says lenders scrutinize rentals much closer than owner-occupied homes; they want to know what type of property it is and where it is.

"In some (homes) near universities or colleges that people buy to rent out to students," Froud says, "lenders are very cautious with that type of a rental because they're usually not taken care of very well."

How long your tenants have been living in your property will also influence buyers.

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The Matthew Olsgard Team

The Matthew Olsgard Team

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