Lately most of the folks that are selling are upside down in their properties and need to do a short sale. Many of these sellers purchased rental properties and have landed themselves with a property worth 50% of its value during the boom. Times are tough and whatever the hardship maybe they need to cut loose of these rental properties that are dragging them down and avoid a foreclosure.
As we work with owners of rental property we also involve their property management company in gaining access and cooperation of the tenants to get the house sold and avoid foreclosure. The way that a lease agreement and management agreement are structured initially are very important items for a seller to consider looking to the future when they intend to sell the property.
Recently we are finding that a few property management companies have created leases that do not allow a property to be shown as is generally customary with 24-48 hours notice given to the tenants. Most recently one of the management companies that drew up a lease like this had no real explanation for why the lease was drawn up this way but they were adamant that even though the property owner is just a few months away from a foreclosure auction there is nothing that could be done to change the inability to have the house shown. The central flavor of the conversation being bitter because the management company was losing a property that they manage (monthly income).
As this whole conversation is taking place I am thinking in the back of my mind how much differently the person on the other end of the line at the management company would be feeling if they were in their clients shoes – staring down the barrel of a foreclosure.
In light of running into this situation a bit more as of late if you are talking to a management company to handle your investment properties and draw up the leases for you one important question to ask of the management company might be “Explain to me the process when I am ready to sell the house whether a tenant is in the house at the time or not.”
Make sure you are not painting yourself into a corner.
Hopefully when you sell you are in a positive equity situation on the property and not staring down a foreclosure with a management/lease agreement that has your hands tied keeping you from being able to actively market and sell your property.