Dear Steve,

I have to sell my house, which is currently being rented out to three youngsters who aren't the most clean or well-organized people. Is having a house already rented an asset or liability in trying to make a decent sale?

-- Aurel

Dear Aurel,

If you plan to show the place to potential buyers while it's still occupied by the Three Young Stooges, well that could be a huge deterrent to the sale -- as you might have already suspected. Even if you try to work out a deal where the tenants vow to keep the place more orderly, in exchange for reduced rent or an extended stay, you can't expect them to keep the house in show-ready shape or even cooperate for showings.

It is that inability to properly "stage" the house that will probably make your place a harder sell, particularly with so much housing inventory on the market. And besides, you don't want the tenants slapping one another or placing each other's heads in kitchen appliances while potential buyers are touring the dining room. Unless you know some certifiably responsible soul who will occupy the place at a discount, in exchange for cooperating with your efforts to market the house, it may be best to give your current tenants notice.

You can then regain occupancy, thoroughly groom the place, make any necessary repairs, and then market the house empty -- but clean. A new coat of paint, new carpeting, some cosmetic landscaping touches and possibly a few new appliances are needed anyway. Yes, you may lose a bit of rent in the process but you may regain the lost proceeds at sale time. Of course, I don't suggest that you try to throw young Larry, Curly and Moe out on their ears immediately.

In some states you have to give tenants a 60-day notice to terminate their tenancy once they've lived in a rental for a year. If you haven't already done so, make sure you research your landlord obligations and rights in your state on these matters before you go any further. You don't want to be the "knucklehead." Also, remember there will be tax implications to selling the place. Currently it's being operated as a business and you probably have depreciated its value through the years on your taxes. So when you sell it, you will have to pay taxes on the difference between the home's depreciated value and the sale price you receive. One way around that is to move into the house and make it your residence for two years -- if that's at all practical. Discuss this at length with your accountant or tax preparer before you do anything. In summation: Stage not Stooge. Good luck!

-Bankrate.com

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