How To Sell A Multi-Family Property
Selling a multi-family home is substantially more complex than selling a single family home. One of the top reasons why selling a multi-family is generally more complex is because it typically involves more people than just the one owner of a single family home.
When selling a multi-family property the probability that you’re involving 6-12 people is high. Depending on the number of units in a multi-family property, you may only be dealing with a couple families or a dozen families.
There are certain rules, regulations, and laws that multi-family property owners must be aware of and also abide by. These rules, regulations, and laws will vary from city to city and state to state.
It’s highly recommended that prior to selling a multi-family home that you consult with an attorney to make sure you’re not going to put yourself in a situation where you could be sued. Not being aware of rules, regulations, and local laws is one of the top home selling mistakes made by multi-family property owners.
Read on to find out what the top 5 tips for selling a multi-family home are. Multi-family property owners who follow the below tips will put themselves in an excellent position to get their property sold, while avoiding potential issues or roadblocks.
Review Leases, Occupancy, & Tenant Rights
Before listing a multi-family home for sale, it’s vital to review all leases and the occupancy for each unit. As mentioned above, multi-family property owners can get themselves in trouble if they’re not careful. It’s important to always keep in mind tenant rights when selling a multi-family home.
There are a few frequently asked questions from home buyers that multi-family property owners will be asked during the sale process. By reviewing the current leases and occupancy of each unit, multi-family property owners will be able to answer these questions accurately. Below are a couple of the top questions asked by buyers who’re looking to purchase a multi-family home.
- What are the terms of any/all leases?
- What are the rent amounts for each unit?
- What’s included in the rent for each unit?
- Are there security deposits being held?
- Are the rents able to be subsidized by Government assistance?
Reviewing the leases and occupancy for each unit can also help determine whether or not to sell the property while it’s being occupied by tenants. Selling a home with tenants can be tricky and it can also bring other potential issues into the equation.
For example, if a multi-family home is being sold while tenant occupied and the leases are for an extended period of time, it potentially can eliminate a large number of potential buyers who’re looking to buy a multi-family home and plan on, or need to, occupy one of the units. One of the disadvantages of a VA home loan or FHA loan is that the property must be occupied by the buyer, so if a buyer is planning on utilizing one of these mortgage products, they wouldn’t be able to purchase a tenant occupied multi-family home.
Selling a multi-family home is easiest and most successful if it’s unoccupied. This eliminates potential issues with coordinating home showings or issues with occupancy requirements. If this isn’t a possibility, then it’s important that the owner has full cooperation from all parties who’ll be impacted during the sale of the multi-family property.
Preparation Is Key When Selling A Multi-Family Home
Preparing a home for sale is critical when selling any type of home, whether it’s single family or multi-family. Since many multi-family properties are purchased as investments, preparing for the sale becomes necessary.
One of the most important factors for investors who’re looking to buy multi-family homes is the amount of maintenance the home appears to have. A home that isn’t prepared for sale can appear to have more maintenance than it really does.
For multi-family property owners who’re attempting to prepare and sell a home on a budget, it can be done by tending to a few key areas of the property. Below are a few of the areas and items that should be prepared prior to listing a multi-family for sale.
- Curb Appeal – Simply tending to the exterior curb appeal of a multi-family home can go a long way. Trimming bushes/shrubs and making sure any flower beds are a couple tips for improving the curb appeal of the property.
- Clean Up Common Areas – Depending on the multi-unit, there maybe some common areas, such as laundry or a vestibule. It’s important that all common areas in the property are cleaned up and portray extra maintenance.
- Parking Areas – If the property has designated parking areas or garage spaces, making sure these are well defined and in good condition is critical. If there is an off street parking area, a simple seal of the driveway can go a long way and doesn’t cost a ton of extra money.
- Doors & Locks – All doors and locks within the multi-family property need to be working well. It’s not a good reflection of a property when the locks are difficult to use and a showing agent is struggling to access the units within the property.
When selling a multi-family home, it’s extremely important that it’s prepared for the market. Not doing so can make or break a deal.
Hire An Agent Who Has Experience Selling Multi-Family Homes
Hiring a top real estate agent, with experience, is extremely important when selling any type of property. For example, when selling a waterfront property, hiring an agent who primarily sells mobile homes in a park wouldn’t be the best idea.
It’s critical when selling a multi-family home that a Realtor® who has experience selling multi-family homes is hired. To help ensure an agent who has experience selling multi-family homes is hired, there are certain questions to ask Realtors® during interviews.
- How do you handle showings when a property is tenant occupied?
- How much notice do you provide?
- In the past, how have you handled uncooperative tenants?
- Can you provide the contact information of the previous owner who you represented during a recent multi-family sale?
Asking the right questions during an interview can greatly improve the chances an agent who has experience selling multi-family homes is hired.
Not only is it important to make sure the agent has experience selling a multi-family home but it’s equally as important to make sure they know how to effectively market a home. Since the majority of home buyers are finding the home they eventually purchase on the internet, it’s critical the agent knows how to reach potential buyers.
This is done by using the best real estate marketing strategies. Marketing strategies such as using social media, optimizing their website to be found in searches, and using high quality photography and videos are a few ways top real estate agents are marketing their clients homes to potential buyers.
Have Important Documents Ready
There are certain things to know before selling a home, regardless if it’s a single family or multi family home. It’s helpful that before listing a home for sale that important documents are readily accessible for potential buyers.
Documents that should be readily accessible, whether selling a multi-family home or not, include documentation relating to roof age or warranties, the age of the homes HVAC systems, and any receipts of remodeling projects that have been completed.
One of the most important features that today’s home buyers are looking for in a home are updated and newer mechanics, such as roofs and HVAC systems. Home sellers who have records and receipts showing the ages of these components give themselves a huge advantage.
When selling a multi-family home, it’s very important to have financial documents readily available for prospective buyers. Since multi-family homes are often purchased as an investment, having the financial documents available can be extremely helpful for potential buyers.
The most important financial document that should be readily available when selling a multi-family home is the yearly net operating figures. This document shows a potential buyer the income from monthly rents and subtracts out the expenses of the property, such as yearly homeowners insurance, yearly refuse, yearly water usage, and any repairs that have been completed recently.
Complete Inspections Prior To Listing The Property
Many municipalities require that a certificate of occupancy, also known as a C of O, is renewed when a multi-family property is being sold to a new owner. It’s highly recommended that prior to listing a multi-family property that any inspections are completed beforehand.
If your local municipality requires a new C of O prior to the property being transferred to a new owner, have the inspection completed prior to listing can reduce the chances that the real estate closing is delayed. If you’re unsure if a new C of O is required prior to the property being transferred, you can contact your local municipality to find out.
Recently while selling a multi-family property in Pawtucket RI, the property owner decided to wait until after a contract was received to complete the required C of O inspection. The City was backlogged on inspections and the inspection date had to be scheduled a month out, which ultimately delayed the closing of the property. This could’ve been avoided if the C of O inspection was completed prior to listing the property.
Another inspection to consider completing prior to listing a multi-family property is a general home inspection. There are lots of reasons to have a pre-listing inspection when selling a home. The number one reason having a pre-listing inspection prior to putting a home on the market is that it provides a homeowner the opportunity to rectify issues that a home inspector may find.
Since the majority of home buyers elect to have a home inspection and some buyers can get scared away from a home because of the inspection results, having one completed prior to listing is a very good idea. Homeowners who decide to not have a pre-listing inspection often end up regretting their decision if a buyer is scared away from their property.
Final Thoughts On Selling A Multi-Family Home
As you can see, selling a multi-family home is much different than selling a single family home. Even though selling a multi-family home is generally more complex, that doesn’t mean that it has to be impossible. By following the 5 tips discussed above, multi-family property owners put themselves in a much better position to experience a smooth and successful sale.
Do you own a multi-family property in Rhode Island? If so and you’re thinking about selling your multi-family property, the above 5 tips should be extremely helpful. If you don’t have a real estate agent in Rhode Island, call or text me at 401-438-0100, and I’d be happy to discuss the sale of your multi-family home!