NOTE: We are not qualified mortgage lenders or providing any legal advice in any of our articles (including this one) - this is purely based on our experiences in Ontario.
Does the Tenant Increase Value?
Short answer: it depends. If you got maximum rent possible in your market, the tenants are great/cooperative and always paying on time, it might even make sense to leave them in (if, say, your home is a duplex, and the potential buyer can move into the other unit).
Evict the Tenant!
This is common first course of action. First off, an important note that many landlords don't seem to realize: you can't force a tenant to leave just because you're selling the home. It may get you in legal trouble, especially if you say you will be living there but it turns out you're just selling it. That would be giving notice to terminate the tenancy in bad faith, and the tenant can up taking you to court for that (by submitting Form T5: "Landlord gave a Notice of Termination in Bad Faith".
Convincing Them to Leave
The best way to evict a tenant to have an empty house to show is simple (but not always easy): provide a solution that works for both of you (a mutual agreement). Let them know you'll be selling. Instead of the standard way of giving them one month rent back, perhaps also offer to pay for their moving costs or even help them move yourself. The key here is not to show your frustration if they hesitate; it will only cause them to get defensive and offended. Be nice. It might be costly for you the short term to convince them to move out, but you'll get maximum dollar when the house looks presentable, which will most likely offset the amount you lost. The buyers want to imagine their furniture in the home when seeing it, not wondering how many dogs the tenant has to create that much fur all over the floor.
The Tenant Doesn't Want to Leave
So you've tried being nice and offering them solutions, but they won't budge. Now what? You have to show the home while they're living there. Here are some tips:
- Giving Notice: At the time of this post, the law in Ontario is to give at least 24 hours written notice to the tenant to show the home (state the reason, day, and time), between 8AM and 8PM . We wouldn't recommend setting up a showing at 8AM to avoid frustrating the tenant. You want them to work with you, not against you.
- Marketing: if the current state of the home is a mess, do you have any old photos stored away, when the house was cleaner? Probably best to use those for your listing. The next possible option (which may be a bit pricey), if the tenant agrees, is to hire professional cleaners for photos and even stagers to make it look presentable.
- Prospective Buyers: if the unit is messy, we would warn them in advance before the showing, so they know what to expect. Most importantly, advise them of how they can evict the tenant and move in (probably best to have a legal professional do this to avoid misleading them unintentionally). They can move in after purchasing the home shortly after closing if they give the proper notice and take the proper steps after the lease term has ended. You can read more about that here.
The best thing to do is work out a deal with the tenant upfront (even if it costs extra), to have them move out before selling. This avoids any complications with marketing the home, explaining it to the potential buyers, remembering to give proper notice to the tenant, dealing with clauses/conditions in offers that might cause the deal to fall through, etc. If that doesn't work, work with the tenant (instead of against the tenant) to sell the home. Go as far as finding them a similar alternative on the market, if you have to.