I got this question from “Frank” on the blog and thought it was worth answering:
“If you were a seller who already purchased a home in this market 90 days out, would you recommend waiting until mid-April to re-list, accept an offer slightly under value now, or lease your place with the intention of re-listing next year?”
Really, the seller is asking whether things are going to be better by mid-April, or whether it’s going to take a year to get back to normal. Obviously, he wants the best price he can get. But he also has a new home to pay for. All of this should influence the answers I give him.
There are a few assumptions that I want to address about leasing first.
First of all, it’s not that easy to get rid of a tenant once you put one in. Let’s assume you sign a 12 month lease. As long as the tenants are paying rent and not breaching the other requirements of being a tenant (like damaging your property), you can’t just cancel their lease and turf them out. They are entitled to stay even after the end of their lease (which converts to a month to month) until they decide to leave.
The only exception is if a buyer buys your home with the intention of they or a member of their immediate family occupying it . Then you have to provide the tenant with a full two month notice before the lease ends in order to provide vacant possession. Same applies in a month to month tenancy: two full months notice.
Which means that you will be showing a tenanted property if you wait to re-list next year, with all the aggravation associated with providing 24 hours written notice of showings, not being able to get buyers in easily, your tenants being inconvenienced by strangers wandering through their home, and limits on when you can close.
So, unless you have a burning desire to be a landlord, I’d stay away from the leasing option. Even the best tenants will not look after your property as well as you do, so when I add the timing issue, the fact that a vacant home shows better than a tenanted one, and the fact a vacant property (or one you live in) is easier to show, I’d take that option off the table.
You will take possession of your new home in 90 days. Which means the real question is do you take a slightly lower offer now or wait to see what happens in April and hope to get more? In all honesty, in my opinion, nothing is going to change for the better for sellers in the next few weeks due to COVID-19. I don’t expect prices to drop substantially, but they are not going to be hot as they were: we will have lower inventory as more sellers step back from listing but also fewer buyers. The past few days we have seen fewer sales than listings; that’s for the first time in over a year.
If you can get a price you can live with and have the funds to close on your new house, this one seems like a no-brainer to me. I’d take the certainty of a sale over the uncertainty of the impact of the virus in the short term, even if I got less than I had originally hoped for, particularly when I have a new house to pay for.
Hope this helps!
This is part four of a question and answer series on COVID-19 and its impact on real estate. Keep those questions coming!