You’ve been paying rent for the same single-family house long-term, and throughout that time, you’ve never missed your month-to-month lease, never violated your rental agreement or lease agreement, and never had to forfeit your security deposit because of damages.
Suppose your landlord has informed you that they want to sell the rental home after your fixed-term lease expires, or your landlord wants to sell the house before the lease is up to simplify their life. In fact, a real estate agent is coming to take photographs of the house.
Before the house is listed on the market, however, your landlord has assured you that they want you to stay in the home. You have first dibs when they sell their property should you hope to purchase it! The problem? You’re worried you won’t be able to get a mortgage in time.
You anticipate that saving enough for a deposit will be the most challenging part of the process. You have some money put away, but it might not be even close to the thousands you’d need for a downpayment and all the extras. It would be best to examine what resources you have at your disposal or how likely you can find the necessary funds. Even if the rental property hasn’t been appraised in a while, you may still use the recent sales of nearby houses as a guide.
If you’re thinking: “my landlord offered to sell me the house, what potential problems should I watch out for?” What do you have that can be used as leverage in a negotiation? Read ahead for more information on how to navigate this special relationship between landlord and tenant in this blog post.
Look At Your Finances
Examining your financial situation in great detail and determining how much of a cash down payment you can make while still keeping your debt-to-income ratio as low as possible is your best chance. It would help if you didn’t use up all of your savings and the money in your checking account merely to make a deposit that ends up being less than 20% of the total amount.
Look at refinancing as soon as possible so you can get a better rate on your loan, no matter the federal interest rate. It would be best if you made it a goal, with time, to demonstrate that your lender can trust you by establishing a track record of making payments on schedule.
Speaking of lenders. If you want to take up your landlord’s offer, get pre-approval before anything else. This is valuable information regardless of the property you wish to buy.
In any case, this demonstrates to your landlord that you have given this issue some serious consideration and that you are intent on buying a house from the landlord. You are a serious buyer, and you have the means to close.
Go to a reputable lender before broaching the matter with your landlord. Determine whether you qualify, how much you are eligible for, and how much you can afford by scheduling a consultation with a lender. There will inevitably be negotiations over the final purchase price; therefore, getting a pre-approval letter for the property’s assessed value or an unknown sum is a good idea.
Get An Inspection
Request that your landlord provide an inspection as a gesture of good faith to ensure the house’s structure is sound. You should never skip a pre-purchase house inspection. Learning whether the property you wish to buy has any damage or symptoms of structural degradation will be important for your future…and bottomline.
Get your home’s key systems inspected by a licensed inspector. The house inspection is not only for finding problems; it may also be used as a bargaining chip with the landlord selling the house. Negotiate for a lower price, for example, if the home is in serious disrepair.
After figuring out your budget, another form of “inspection” or examination you should do is a comparative market analysis of the house. This will give you a ballpark figure for what houses are selling for in the area and teach you how much to offer. If you can demonstrate this level of expertise to your landlord, you will be taken more seriously.
Be careful to zero in on the most current home sales prices while doing market research. The asking price of a house on the market is not a good indicator of its value; the sales price is far more reliable. Most appraisers only look at recently sold properties and evaluate homes listed on the Multiple Listing Service.
Acquire A Purchase Agreement
If you find yourself asking: “my landlord is selling the house; what are my rights?” However great your landlord-tenant relationship is, a written contract and the advice of a real estate attorney or state laws is always a safer bet. The best way to know what you’re being offered precisely is to have a purchase agreement in writing. Check out how it stacks up against nearby houses as well.
If the landlord is serious about selling you their home, the next step is to sign a purchase agreement. The details of the sale are specified in a legal document called a purchase agreement. The buyer and landlord will enter into a binding contract with this document.
The components of a typical purchase agreement are the closing date, the option period, exclusions being sold with the house, terms and conditions that you and the landlord negotiate, earnest money deposit amount, the price, the legal property description, and address of the property, and of course, your name and name of the landlord.
Hire A Realtor
While it would be ideal if your landlord had your best interest in mind, they also have to look out for themselves. Having a representative look out for your interests is crucial. In addition, they will be able to guide you through the maze of closing paperwork that you will be expected to complete.
A real estate agent will be there to guide you through every step of the sale process, from signing the contract to completing the closing. They will also provide guidance on how much to offer, how much to ask for, and what type of transaction backups to have. In case you are unable to do your own market investigation, or if you just require verification of comparables, they will be able to assist you.
Knowing your rights and obligations as a buyer is vital since most landlords are already knowledgeable. It is common for the seller to cover the commission as part of the closing expenses, so you do not have to pay anything to obtain the services of an agent.
As soon as you feel prepared, respond to your landlord regarding the offer. Set up a time to chat and alert the landlord that you want to discuss the possibility of beginning the process of selling the home.
Settling on a fair price for the sale might take time, and setting up an appointment will provide both parties with that time. You’ll have a stronger case if you can show that you can afford to do so and that you’ve already been pre-approved for the loan. If you don’t ask, you’ll never know.
It would be much less stressful if you could purchase the property you’re renting now if you like it. There’s no need to subject yourself to the anxiety of packing and unpacking. For the landlord, selling the house to the tenant might mean a short sale and a painless deal. Be as ready as possible before pursuing this option.
The first step is to be pre-approved for a loan; then, you should get an inspection, talk to a realtor, and set up a meeting with the owner. In the worst situation, you might not reach an agreement. But at least you have the means to make a buy immediately, and you’ve alerted the landlord to the fact that you’d be interested in buying if they do decide to sell their property.