My Approach to Tenant Buyouts/ Cash for Keys

Having done buyouts for several years now, I have gathered a lot of data and refined my methods. I will share with you what has worked to get deals done with tenants.

You Need to Give Tenants Something to Consider

One of the most common mistakes landlords make with initial tenant approach is to ask the tenant what they want to move. Tenants have no idea where to start or what to even say to that. In context, the landlord doesn't want to pay too much, but a tenant, their fear is not getting paid enough. When you ask tenants what they want you put them on the defensive, leaving them to overthink that they are going to get ripped off, they will blow their opportunity, or they are being played with. When tenants are in the hot seat of putting out the first offer they are not inclined to even respond or they say a figure and later back track because they had no information.

If the landlord wants the tenant out it is on the landlord to throw out the first offer. Putting together the initial offer is quite easy, start with what relocation is for your jurisdiction based on the applicable criteria (number of bedrooms, length of tenancy, age of tenants, and/or qualified disabilities). My initial offer letter is straightforward and puts in a very clear table that their landlord will pay X amount for X move out date.

The initial offer will vary based on relocation amounts, if the tenant has any arrears, landlord/ tenant relationship, and landlord's motivation. Not all offers are the same, but the initial approach is- get something in front of the tenant to consider.

Tenants Should Be Given the Time to Get Guidance

Another big mistake landlords make is trying to avoid the tenant getting informed on their tenant buyout rights. There is absolutely no reason a tenant should not be informed of their rights, in the exact same way there is no reason a landlord shouldn't know their rights. A tenant knowing their rights does not equate to the tenant getting exactly what they want. Quite frankly, tenants are going to call housing and hit up Google anyways, so why set off red flags by being dodgy or evasive.

A buyout at its core is a voluntary move out agreement. You risk a tenant cancelling or not moving out if they feel the deal was not reached by good faith negotiation. A successful agreement is one in which both sides are good with what they get or what they are giving. It may not be exactly what each side wanted, but they are willing to live with it.

Give tenants time to think over the offer, weigh their options, call housing, ask friends and family, start looking for new rentals or even a new house to buy! But let tenants make informed decisions, if you want to increase your odds of actually getting keys.

Buyouts are a Business Decision for Landlords, but a Life Changing Decision for Tenants

This is a line I drop on nearly all my consults with clients who have never done buyouts before "a Buyout is a business decision for the landlord, and a life changing decision for the tenant."

For many tenants the amount offered in a buyout is the first time they have ever seen that kind of money being offered to them in lump sum. Before that offer they likely thought they would live their whole life in their rental. A buyout offer is like an optional, negotiable lottery ticket. With that money a tenant could do a lot of things, but it comes at the price of moving, likely to a more expensive (but nicer unit), buying a house (my personal favorite success story for tenants), or moving out of town (possibly out of state or country). For some tenants this money could give them the confidence to make a life decision that is now possible with this money. But it comes at the price of change, and some tenants will make that change in a heart beat, and others take months, or never make the leap.

I like my approach because it's humane, to both landlord and tenant. I don't sugar coat with either side, but I don't pretend either is aloof. I have learned tenants are smarter and landlords are more generous than either gets credit for, respectively.

Ultimately, you get one good first impression with tenants you want to buyout. Make the impression good by being upfront with tenants, present them the offer, give them the buyout disclosure, let them think, and above all be patient. Deals don't always happen over night, but successful deals are worth the back and forth.

The information in this post is for general information purposes only. Nothing on this post should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.