One of the most common mistakes landlords make when initially approaching a tenant about a cash-for-keys buyout is to ask their tenant what they want (how much) 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 for the tenant, they may fear not getting paid enough.

When you ask your tenants what they want, you are putting them on the defensive and leaving them to overthink that they are going to get ripped off, they will blow their opportunity, or they are being “played” by you. When tenants are in the hot seat of putting out the first offer, they are not inclined to even respond, or they may give you a figure and later back track because they did not think about it carefully or were lacking sufficient information.

If a landlord wants their tenant to move out, it is the responsibility of the landlord to throw out the first offer. Putting together the initial offer is quite easy. I suggest that you start with finding out how much relocation fees, if any, are minimally required in your local jurisdiction based on your tenant’s applicable criteria (e.g., number of bedrooms, length of tenancy, age of tenants, and/or qualified disabilities). My initial offer letter provided for my clients is straightforward and puts in a very clear table that their landlord will pay “X amount for X move out date.” The initial offer made will vary based on the jurisdiction’s specified relocation fees, if any, if the tenant has any past due rent, state of the landlord / tenant relationship, and landlord’s motivation to recover the unit. Not all offers are the same, but the initial approach is to 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 allowing their tenant to seek information about 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 too. A tenant knowing their rights does not equate to the tenant getting exactly what they want. Quite frankly, tenants are likely going to call their local jurisdiction’s housing department or rent control board, or obtain information available on the internet, so why set off red flags by being dodgy or evasive!

A tenant buyout agreement, 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 with you through good faith negotiations. A successful tenant buyout agreement is one in which both sides are feeling good about what they get or what they are giving. It may not be exactly what each side wanted, but each side is willing to live with it.

Give tenants time to think over the offer, weigh their options, call their local jurisdiction or housing department, discuss with friends and family, start looking for a new place to rent or even buy a new house or condominium! But let your tenants make only an informed decision 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

As I often say, “Buyouts are a business decision for landlords, but a life changing decision for tenants.” This is a line I drop on nearly all my consultations with clients who have never done buyouts before. For many tenants, the buyout amount offered is the first time they have ever seen that kind of money, especially when being offered to them in a lump sum.

Before getting that offer, they likely thought they would live their whole life in their existing rental. But to a tenant, a buyout offer can be like an optional, negotiable lottery ticket. With that kind of money, a tenant could do a lot of things. Although when it comes at the price of moving, tenants may find the process to be more expensive than anticipated (but they’ll get a nicer rental unit), some tenants end up buying a house or condominium (my personal, favorite success story for tenants), or moving out of town (possibly out of state or country), which may be life changing for them. For some tenants, the money they receive could give them the confidence to make a life decision that was only possible with the buyout money. But the buyout money comes at the price of necessary change, and some tenants will make that change in a heartbeat, and others might take months, or never make the leap.

I like my approach to tenant buyouts because it’s humane to both landlord and tenant. I do not sugar coat my approach to either side, but I don’t pretend either side is aloof. I have learned tenants are smarter and landlords are more generous than either side gets credit for, respectively. Ultimately, you get one good first impression with tenants you want to buy out. Make the impression good by being upfront with tenants, presenting them with the offer, giving them the buyout disclosure, letting them think things over, and above all, be patient. Deals don’t always happen overnight, but successful deals are worth the back and forth.

By Sasha Struthers, Esq., Struthers Legal, APC

If you are interested in learning more about tenant buyout agreements and wish to have a one-on-one session to go over your specific situation, you can sign up for a consultation with Sasha. Sasha Struthers is a California licensed Attorney and Real Estate Broker with a law practice that focuses on ‘Cash for Keys’/ tenant buyouts and government agency complaints such as REAP, CRD, and Orders to Comply. Sasha’s experience managing a 15-building real estate portfolio, including five apartments subject to LARSO has allowed her to help landlords strategically reposition their portfolios, maximize income, and reduce management stress. You can check out her law practice at www.struthers.legal.