Eileen's Blog

Sell Your House Now or Rent It Until Market Improves?

June 1st, 2011 1:17 PM by Eileen Denhard

Sell Your House Now or Rent It Until Market Improves?

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by Bob Kelly, Guest Writer

There are times when talking to potential sellers a discussion arises about selling now vs. renting until the market recovers. Sellers today who are suffering from sticker shock about what comparable homes are selling for in their neighborhoods start to sing the well known song, “If I can’t get my price, I’ll rent it.” When that refrain surfaces I launch into my chorus of “Make sure you know what you are getting into.” All joking aside renting your property vs. selling it brings up issues that may not have been considered and should definitely be verified before making such a decision. The rules regarding tenant rights are different in every state and should be investigated with a real estate attorney before entering into any such agreement.

Here are some pitfalls to think about:

  • When you rent your home you will be getting calls from the tenants when problems arise. Appliances break, vandalism happens, small things are not quite right or as expected by the tenant. Who will handle and overcome these objections? If you are moving out of the area, it certainly won’t be you. If it is you, are you equipped or interested in dealing with things whenever they happen? You can hire a management company that will intervene on your behalf and be a buffer between you and your tenant, but it will cost you a percentage of the monthly rent.
  • A landlord in most states must set up an interest bearing escrow account solely for the purpose of holding the security deposit. You are not at liberty to use this money at any time. At the end of the lease term you must return the security deposit plus any accrued interest to the tenant.
  • There will be an added cost to you to change your homeowner’s insurance from “owner occupied” to “investor” status. Check with your insurance company before making any decisions.
  • In certain states is can take 60 days or longer to get an eviction for either delinquency or non-payment of rent. That is time that you will have to absorb the costs entirely for the property plus the attorney fees.
  • In many states should a tenant declare bankruptcy they cannot be evicted until the bankruptcy is settled. This could take 3 years or more. You will be having someone living there rent free and perhaps not taking proper care of your investment.
  • When you do decide to sell your property it is now an investment property instead of your primary dwelling and there may be higher fees to pay at the time of sale.

We all like to think on the bright side and rarely want to look at what could possibly go wrong. This is one of those cases where before making any kind of decision you need to consult with the experts in your state—a real estate attorney, your insurance company, and a realtor or management company. Also do the “what if” scenario on paper and determine how long you can absorb the extra costs should something go not quite as planned. You may find that the potential for loss far outweighs what you would be losing if you decide to sell at the current market value.

Click here to read more blog posts by Bob Kelly.



Read more: Sell Your House Now or Rent It Until Market Improves? | REALTOR.com® Blogs
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Posted by Eileen Denhard on June 1st, 2011 1:17 PM

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