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How to Sell a Rental Home to the Tenant

by Elle Di Jensen, studioD

If you own a rental home that you've decided to sell, finding a buyer could be as easy as offering your tenant the option to buy it. She may be happily settled where she is and could be ready to own her home. If that piece falls into place, it will save you time and money marketing you rental home. You're not out of the woods yet, though. Once your tenant agrees to buy the house, you still have to go through the process of selling it, just as if it were to any other buyer.

Hire a real estate attorney. The attorney will advise you on real estate laws in your area, help negotiate the contract and can also help with the title to the home.

Determine the value of the home. You can contact a real estate agent to get an idea of what similar homes in nearby neighborhoods are selling for. Alternatively you could get information on recently appraised values of comparable homes from an appraiser.

Negotiate the price and terms with the tenant. You can present your asking price, but be prepared for your tenant to counter with a lower offer. You'll have an idea of what is a reasonable price from the research you've done. Consider issues like repairs that the tenant is willing to make at her own expense, appliances and other fixtures to be included in the sale and what closing costs each of you will pay after settling on an agreed-upon price.

Discuss an earnest money amount with the buyer. It is separate from the downpayment, and is a small fee, paid up-front to show the buyer's good faith intention of purchasing the home. It will be credited toward the home purchase at the closing.

Consider doing a contract-for-deed. You may want to finance the home for your tenant if she is unable to get a loan for the home through a mortgage company. If she's rented from you for an extended period of time, you'll have an idea of whether she pays her bills on time. Even so, you'll still want to obtain a credit report and get confirmation of her on-going employment to verify that she has the resources to pay for the home.

Sign the contract. Have your attorney draw up the sales contract once all of the terms have been agreed upon and you know what your tenant's financing and down payment plans are. Both you and the tenant will sign the contract.

Get the title work. Ask the attorney to order a title report on the home in preparation for closing on the house. Your attorney may already have taken care of this issue, but it's wise to make sure that it gets done.

Meet with the appraiser to value the home. If your tenant is financing the house through a mortgage company, they will have ordered the appraisal. Even if you will be carrying the contract on the house, an appraisal should be done to ensure the value of the home.

Make any necessary repairs that you've agreed to make.

Arrange for closing with your attorney once the inspections and repairs have been made and the tenant's financing is in order.


  • In some areas of the country, home sale closings are done at title companies. Your attorney can help arrange the closing even if he won't be doing the paperwork himself.
  • A real estate agent can be just as useful as an attorney. Even though you already have a buyer, you'll still have to pay the agent's fee. Find out what agents in your area charge and compare it to what an attorney would charge.
  • Some tenants express interest in buying the home they're renting when they move in. If you were already thinking of selling the home in the near future, you can have your attorney write up a rent-to-own contract instead of a typical rental agreement.


About the Author

Elle Di Jensen has been a writer and editor since 1990. She began working in the fitness industry in 1987, and her experience includes editing and publishing a workout manual. She has an extended family of pets, including special needs animals. Jensen attended Idaho and Boise State Universities. Her work has appeared in various print and online publications.

Photo Credits

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