- The Washington Times - Friday, January 17, 2003

The New Year is a time to unload, whether it is the few extra pounds you picked up over the holidays, or that extra condo, apartment or second home you have been meaning to sell. Depending on where you live, however, selling your rental property can be more of a hassle than dropping those last five pounds.

"It can be a nightmare," says one Washington-area broker who asked not to be identified. "There are times when I'd rather stick pins in my eyes than deal with the process especially in the District."

To be sure, D.C. regulations are tough, particularly for landlords.

"The situation in the District is very complex," says Mark R. Raddatz, a partner at Raddatz Law Firm in the District. "Tenants have specific statutory notice rights and rights to purchase in regard to a third party."

The laws are far less stringent in Maryland, although Montgomery County and Takoma Park in particular have fairly strict regulations that favor the tenant.

"In Takoma Park, the tenants have first right of refusal," says Jody Beal, regional director for District of Columbia and Pennsylvania property management for Long & Foster Realtors, "but all in all, the laws are softer than those in the District."

In Virginia, the situation is far more simple.

"Virginia is a commonwealth," Mrs. Beal says. "Basically, all you do is wait until the lease runs out."

Nightmare stories of sales gone wrong prevail no matter where you live.

There's the Northern Virginia woman who came home to her apartment after a two-week vacation to find that the owner had drilled through her locks and installed new ones so he could show the property.

Then there's the Bethesda resident who was told she had to keep her curtains open and shades up while her house was on the market.

In the District, there is the tenant who, after being informed of the intent to sell, trashed his apartment, poured bleach on the lobby carpet and terrorized the other tenants.

So how can you be sure that if you decide to sell your rental property, the process will go as smoothly as possible?

To begin with, says Jack Terrillion, chairman of the Independent Rental Owners Committee of the National Apartment Association, you might start with something that seems in short supply in the Washington area good will.

"Keeping on good terms with the tenant is important," he says. "You want to do things in a friendly way and not be dictatorial."

Good will can be simple and obvious, such as giving tenants adequate notice of your intent to sell. Or, in situations where you need the tenant to leave before the lease is up, it may entail doing other things, such as paying moving expenses or returning a security deposit even when there has been some damage.

"It's a cheap price to pay," Mr. Terrillion says. "Sometimes, I'll even pay to move them to another of my properties."

Dovetailing your needs with those of the tenant, while seemingly costly in the short run, can be rewarding in the long term.

"For one thing, you want your property to show nicely," he says. "So the less you can avoid being confrontational, the better it is for everyone. If your goal is to sell the place, good will goes a long way."

Of course, in the District, the sale process can be a different beast altogether. Thanks to the city's tough stand on giving substantial notice and tenant right of refusal, D.C. landlords can sometimes find it easier to sell their buildings entirely than to keep on renting.

Take the case of Pete Ross. A D.C. resident for more than 25 years, Mr. Ross recently went through the process of removing tenants from a property he owned near Union Station, after they failed to pay any rent at all for almost a year.

"One of the things that happens here with people who are not professional landlords is that the tenants come in you get to know them, and you don't want to do anything because you know them personally," Mr. Ross says.

Since they moved in the mid-1990s, the tenants had been paying the same rent $750 a month for the three-bedroom town house, but gradually, they stopped paying anything at all.

So Mr. Ross started the process of going to court, hoping just to "light a fire" under his renters. They worked out a payment plan, but the tenants stopped paying altogether after just a couple of months. Mr. Ross finally had to go to court a second time to have the tenants evicted.

Still, he remains upbeat.

"I didn't have any real objections to the process," he says, "but I'm getting ready to put the house on the market."

The tenants had trashed the place. Once Mr. Ross had done the necessary repairs, he found he had an appreciating property on his hands in a neighborhood that seemed on the verge of gentrification.

"Now, I'd have to charge $1,750 month to cover my costs," he says. "It's easier just to sell it to some young couple."

Mr. Ross is fortunate in that his tenants will have already moved out by the time he is ready to sell. Other landlords must contend with the District's Rental Housing Act, which spells out the process if tenants are still on the premises.

If you want your sale to go smoothly, it's important to know the law, and, Mrs. Beal says, it's important to make sure that your broker and the buyer's broker are equally well versed.

"If the owner is truly interested in trying to sell, it's highly important for the agent to understand the tenant's rights," she says.

In the District, for example, an owner cannot displace a tenant unless the owner will move back into the property and not rent it for 12 months.

In addition, D.C. tenants have first right of refusal, which means that an owner contemplating sale will have to offer the property first to the tenants who are already living there.

That is when things can get even more complicated.

"Once the tenants have received notice of the intent to sell, they have 30 days to think about whether they want to buy," Mrs. Beal says. "After that, they have 60 days to negotiate a new price. Beyond that, they have another 30 days to work out the financing."

D.C. landlords are governed by the Department of Consumer and Regulatory Affairs. They cannot require tenants to vacate while the property is on the market. This means that cleaning and painting, an important part of the getting-ready-for-sale process, often cannot be done, and if the new owner is planning to gut the building and reconstruct the units, he will have to pay a stipend or relocation costs.

"Tenants have the right to stay as long as they can pay," Mr. Raddatz says. "If you are buying the building, you also are 'buying' the tenant."

How do you know how much your property will sell for? Gilda Simons, property manager and agent at Diplomat Realty in Hyattsville, who deals largely with properties in Prince George's County, says it is important to look at similar places in the area to see what they have been selling for.

"That gives you a base line," she says. "But you also need to look at the rent the tenants have been paying, the repairs you have to make, and the overall condition of the property."

Run-down property or one that will need a major repair, such as to the roof or heating and air conditioning systems, may require additional negotiation with the buyer. Mrs. Simons says that even minor repairs, such as painting and plastering, are negotiable.

"Most people today will have a home inspection before buying a home," Mrs. Simons says. "Even a tenant who has been living in a house for years will have a home inspection. It gives you something to work with when you are negotiating."

D.C. landlords should make sure that they are in compliance with codes and regulations, Mr. Raddatz says.

"Price is highly dependent on how good the landlord is with compliance," he says.

So, who is the best person to buy your rental property? In most situations, it is the person who has been living there all along your tenant.

"If I feel a tenant is credit-worthy, the first effort I make will be to sell to that tenant," Mr. Terrillion says.

Mr. Terrillion uses a form letter that gives current residents the option to buy.

"I tell them that the offer will expire in one month," he says, "but if they meet my selling price, we will go directly to the title company, with no real estate agent involved."

To help residents decide, Mr. Terrillion gives an example of what the monthly mortgage payment, combined with taxes and homeowners fees, might be.

"Often, people find that they'll make out better if they buy," he says, "and usually the very best people to buy are the ones that are already there."

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