My landlord let me know that he is going to sell the house I rent. My lease will end in a few months. I love the place, but I suspect it is worth slightly more than I can afford. Would my landlord have any incentive to sell the place to me at a lower price? If so how much lower? Should my next step be to talk to a local realtor to find out more about the local market? Should I ask him what he’s planning to list it at?
My landlord is selling. Does he have any benefit of selling to me at a discount?
byu/Fedr_Exlr inpersonalfinance
Posted by Fedr_Exlr
35 Comments
>Would my landlord have any incentive to sell the place to me at a lower price?
He could avoid realtor fees, so about a 6% discount, assuming neither of you retain representation
Is he selling it now, or when you move out? If he’s trying to sell it now, it’s a lot harder to sell a property with an active lease, even if it’s coming to an end (risk of holdover tenants, etc).
Would you waive inspections and pay with all cash? If not, I don’t see any incentive not to list it for multiple offers.
Your only leverage would be to buy it without a realtor involved so there are no commission fees and then you could offer slightly more than the asking price minus the commission. But if the landlord has already engaged a realtor, they are probably under contract to pay the commission even if the landlord finds his own buyer without the realtor’s help. Also, you probably will have to waive all inspections and have no contingencies except for getting the mortgage. You should get approved for a mortgage first.
edit: I have bought 7 houses without a realtor involved and also no inspections. It isn’t a big deal.
My Godmother is in a similar situation, she has been a very long term and good tenant, but the landlord is looking to sell, he is looking for 950k, but said he would offer it to her for 900K (we are in northern NJ where prices are crazy). So its possible the landlord would offer you a discount, save him the trouble of finding a buyer, and save on possibly having to use a broker or real estate agent, just up to whether your landlord wants to do it, worth asking.
Maybe the option to sell to you now instead of waiting for your lease to end? And like someone else said you could possibly avoid realtor fees which would save him 6%. It’s worth having a conversation.
It all depends, is there a reason he’s selling, if they are trying to get out of it then maybe you can do a quick close. Are you looking to pay cash? Sometimes they sell at a steeper discount with cash. There’s no real incentive for him to sell cheaper unless the loans under water or he’s moving. It doesn’t hurt to ask but you need to have all your ducks in a row as well. It might help to have funding or proof of funding as well.
Here is your advantage:
1. You can start the transaction much earlier than anyone – Landlord might be interested in getting the money early versus waiting for another few months
2. You know the condition of the house, where inspection might be needed or not.
3. Both you and landlord may save realtor fees, 5% of the transaction is thousands of $$.
Disadvantage:
1. There could be underlying issue that you don’t know until a full inspection is conducted – and thats money you might want to spend.
2. Landlord’s offer may not be negotiable.
3. Skipping realtor also means you have to find your own contractors if any work is needed.
I’m a landlord and I would consider selling to my tenant for a lower price if it meant I didn’t have to get the house ready to sell and could avoid paying a real estate agent commission.
I think it’s worth looking into. You may want to see what you qualify for and then propose it to your landlord, saying you want to buy the house as is and directly with a RE attorney, so no commissions.
It could be a mutually beneficial arrangement, assuming the offer isn’t too low.
You could always ask.
A similar thing was how I bought my current house.
Selling costs can be $10k for carpet / paint / prep + 10% of sale price for concessions / realtor fees / etc
So yes try to work something reasonable for the low hassle of you not moving and them not going through everything
The biggest benefits I imagine would have would be them not needing to pay for a real estate agent.
Also it’s a lot easier. They wouldn’t need to show the house and can get his money a lot quicker.
If it was me and you were offering a fair market price I’d take it. The only thing I could imagine screwing you over is the owner thinking they can sell the house for more than it is and looking for an offer that just doesn’t exist.
All good advice in here, I’m in a situation too where I think a year from now I’m going to just straight up ask my landlord if I can buy the house off her. Shoot your shot if you love it enough!
You could save money not needing to move and use that to increase your bid.
I bought the house I was renting from the landlord. It was investment property and they needed the cash back out. They made me a deal. They didn’t have to list it or pay realtor fees. Super simple transaction. Win-Win. And, yes, we still did an inspection and due diligence.
I did exactly this to buy our first home. We ended up using a realtor as it was my first time and I was weary of going without, but the landlord was still happy to give us a lower price and sell it off market to save the significant time and cost of vacancy, repairs, etc.
The biggest upside as the buyer, even if you don’t get a below market deal, is that we basically had two years of living there to know all the little quirks, see how the landlord had maintained it, etc. That is INCREDIBLE value, as you often end up buying a house with very little information and inevitably find surprises later on.
It worked out great for us and for him!
It also depends on the renter protections in your state. If a new owner has to honor your tenancy, it would give you a leg up.
You could consider contract for deed as well. Landlord gets to keep bringing in money, you get the chance to treat the place like your own and after the contract is up it’s treated as a refinance and not a new purchase.
Ok, have a third party appraiser come out and do a formal appraisal. To be fair, commission fees should be split 50/50. Have the seller do a home inspection and a pest control inspection, both of which they’ll need to do. Figure correction costs, negotiate from there. Typically, renters never end up buying. This way, no harm, no foul, no hard feelings.
A realtor/s can cost anywhere from 2.5-6%. If you’re hoping for a discount greater than that, consider yourself lucky. Usually investment properties (aka rentals) are owned for the purpose of it being an investment and owners don’t sell for much less than it’s worth just to do a favor like a family member would.
If he sells to you then he doesn’t have to fix it up first.
You’ll never know unless you ask. But to be clear, sellers definitely save money by having quick and simple sales with no realtor fees.
I’d talk to him directly, he could save on realtor commission if it’s a private sale.
Depending on what his situation is too, there may be the ability to negotiate terms and do seller financing, allowing for maybe lower than market interest rates, lower down payment, an interest only period, or any number of other options that might not be there using conventional financing.
Yes, he would prefer you only if you two can agree on a discounted price
Here’s what I’d do – figure out what you can/would pay for it. Offer the landlord that amount and say you’ll wave the inspection (maybe get an inspection on the DL before hand), and will hire a lawyer to draw up the deal so he doesn’t have to pay out the 6% commission. Remind him he’ll also save money and time by not having to fix up the place and stage it.
Your leverage is in not involving realtors.
I bought from my landlord. I didn’t need a realtor and he didn’t need to do an inspection and worry about me nitpicking at things here and there. Worked out for both of us
You can buy at a hugher price if he finances it himself and you can negotiate ~0 apr, just get an amicable contract drawn up by a lawyer.
Lots of incentive. Getting a house ready takes time and money. Agent fees are also 6%. So if the house is $300k, that’s $18k. If you offered $290k he would still come out ahead.
He could avoid some realtor fees and have to spend $0 on getting the house ready for sale. Also not have to deal with the overall headache of listing a houses.
He doesn’t have to list it, doesn’t have to prep it for showings, and potential buyers don’t have to worry about whether the renter (you) will leave. Also, you’ve been living there so you may already know about any potential issues.
If you can agree on a price, he doesn’t need to pay retailers and can just get a lawyer to draw up the paperwork, so that could knock 5% or so off the price.
He does lose out on the possibility of a bidding war, though, so it’s not all upside.
Anecdotally, I did this. When I bought my condo, I had been renting it for five years already. I was able to buy it at a discount from my landlord and everything went smoothly through the entire process.
We bought from our landlord off market. Saved a chunk not having to pay realtors.
There are a lot of variables, and you haven’t given us basic information like market location, estimated value of the home and its condition.
HOWEVER, if you know what his selling price is going to be you can make him an offer that subtracts:
– 6% for a realtor
– 1-2% to prep a property for sale (landscaping, cleaning, inspections, repairs)
If those reductions put the home in your price range, then you can probably make him a competitive offer at a lower price through a private sale. Moreso if you’ve already got financing lined up.
I’d suggest being honest with the seller 100% – You don’t want him to think he’s getting played or that you’re wasting his time. Ask him straight up if he would be amenable to selling the home to you – in cash – at a valuation that accounts for his savings by going through a private sale.
The biggest value-add you can give him is to make the sale as quick and painless as possible.
No agent commission if he sells to you privately