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Buying a House you Currently Rent

ProfessorDeac

ProfessorDeac

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There's been a lot of house buying conversation lately and there seem to be some pretty knowledgeable people here. I've never done it and need some advice.

We're currently renting month to month and know the owners are interesting in selling. They've said they won't sell out from under us, but we can't depend on that forever. Plus, we like this house and would be interesting in owning it. So, we're thinking about raising it with the property manager.

My concerns are:
1. While we've been living here for 2 years with no major problems, the house is old (1950s) and we don't know what problems it might have coming down the road.
2. We would want to make minor renovations if we bought it (the biggest would be dividing a room in two and replacing an outdoor shed). We are not handy people, so would be hiring someone.
3. The property manager is a real estate agent (sole proprietor) who told us about the owners' interest in selling and apparently wants to do it for them. He is nice enough but not super reliable, plus as a lawyer I'm disposed to always have someone "on my side" in any transaction, but I don't know the extent to which that's necessary/possible in this kind of situation.
4. If we save the owners the hassle of putting in on the market, I'd like some discount for that (for example, the wiring works and is safe, but we know it's not to code in every room, which I would think they'd have to fix if putting it on the market).

Any thoughts from the smart property people on how to proceed? Maryland.
 
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ProfessorDeac said:
There's been a lot of house buying conversation lately and there seem to be some pretty knowledgeable people here. I've never done it and need some advice.

We're currently renting month to month and know the owners are interesting in selling. They've said they won't sell out from under us, but we can't depend on that forever. Plus, we like this house and would be interesting in owning it. So, we're thinking about raising it with the property manager.

My concerns are:
1. While we've been living here for 2 years with no major problems, the house is old (1950s) and we don't know what problems it might have coming down the road.
2. We would want to make minor renovations if we bought it (the biggest would be dividing a room in two and replacing an outdoor shed). We are not handy people, so would be hiring someone.
3. The property manager is a sole proprietor who is nice enough but not super reliable, plus as a lawyer I'm disposed to always have someone "on my side" in any transaction, but I don't know the extent to which that's necessary/possible in this kind of situation.
4. If we save the owners the hassle of putting in on the market, I'd like some discount for that (for example, the wiring works and is safe, but we know it's not to code in every room, which I would think they'd have to fix if putting it on the market).

Any thoughts from the smart property people on how to proceed? Maryland.
Click to expand...

Hire an inspector before you make an offer. Know everything that it wrong with the house and how much it will cost to fix it. You might decide that you don't actually want the house after that. Depending on the sales velocity in your neighborhood you might be able to negotiate a price 5% below market value based on not involving a REALTOR ! But, if you are friends with a REALTOR ! you'd be well served by having them pull some comps from the neighborhood of homes with similar square footage, with the same number of bedrooms and bathrooms so you can make an informed offer.

Don't involve the property manager any more than necessary. He only makes money when the house is rented.
 
Thanks. I should have added the property manager is a real estate agent and is the one who told us the owners want to sell. I think he wants to do it himself, but that makes me nervous. I edited the original post.
 
What's with all those irritating realtor commercials now where they overemphasize the heavy pronunciation "real-tore?" Like is that supposed to make it more important sounding?
 
I just closed on a home I rented, this exact scenario...


Not bringing a buyer's agent to the table is huge. That can be up to a 3 percent commission he avoids.

Remember technically in most states he has to buy out your lease if he sells the house before it is up. So if you have multiple months left on your lease it could be a significant amount. In the negotiations think of yourself as a separate entity - renter and buyer and act accordingly. Make sure if you close in the middle of the month you get your prorated rent back for that month.

Also, not having to paint and otherwise clean up the house for marketing purposes could be big as well. Don't undersell this point

We ended up saving like $100 a month paying a mortgage instead of the rent plus building equity... It was a great move for us and I wondered why we didn't make an offer to landlord sooner.
 
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Pretty much all of that is wrong ^^^^

But yeah do an inspection. Lots of lease purchases give a rent paid credit towards the purchase price.

Keep in mind that you dont have to make it happen overnight. You could sign up a lease purchase option tomorrow, not close for 6 months while you shop a mortgage and maybe negotiate 1/2 of the rent you pay during that time goes to EM.

Depending on how well off your LL is, and what kind of relationship you have with him now, he might even be willing to seller finance.
 
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I just went through the process so I guess I must have dreamed up the conversations I had with landlord and his agent

My assumption is the landlord wants to sell the property immediately to the tenant or somebody else
 
ProfessorDeac said:
There's been a lot of house buying conversation lately and there seem to be some pretty knowledgeable people here. I've never done it and need some advice.

We're currently renting month to month and know the owners are interesting in selling. They've said they won't sell out from under us, but we can't depend on that forever. Plus, we like this house and would be interesting in owning it. So, we're thinking about raising it with the property manager.

My concerns are:
1. While we've been living here for 2 years with no major problems, the house is old (1950s) and we don't know what problems it might have coming down the road.
2. We would want to make minor renovations if we bought it (the biggest would be dividing a room in two and replacing an outdoor shed). We are not handy people, so would be hiring someone.
3. The property manager is a real estate agent (sole proprietor) who told us about the owners' interest in selling and apparently wants to do it for them. He is nice enough but not super reliable, plus as a lawyer I'm disposed to always have someone "on my side" in any transaction, but I don't know the extent to which that's necessary/possible in this kind of situation.
4. If we save the owners the hassle of putting in on the market, I'd like some discount for that (for example, the wiring works and is safe, but we know it's not to code in every room, which I would think they'd have to fix if putting it on the market).

Any thoughts from the smart property people on how to proceed? Maryland.
Click to expand...

Don't use agents. That's the discount. The house is already found which is their whole purpose.
 
Well, when someone lists a house for sale, the owner signs a listing agreement with the listing agent. That agreement stipulates a percentage commission that the Seller will pay the Agent upon the sale of the house. In the event that another agent brings a buyer to the table then the listing agent then has to work out a deal with the buyer's agent for a split of that commission. The buyer's agent has no agreement or contract with the Seller.

Typically, for single family residential properties, a listing agent will want 6% of the sales price as their commission. This allows them to split that 6% with the buyer's agent, giving them 3% of the deal. Both agents then walk away with 3% upon the sale. If no buyers agent is present then the listing agent gets to keep the full 6%, since the seller will always still owe the 6% per the listing agreement. The seller does not save any money based on whether there is a listing agent or not.

So, if a listing agent tells you that you will get a better deal by not hiring an agent, then what that means is that they will make more money.
 
TheTwinAndreBen said:
Well, when someone lists a house for sale, the owner signs a listing agreement with the listing agent. That agreement stipulates a percentage commission that the Seller will pay the Agent upon the sale of the house. In the event that another agent brings a buyer to the table then the listing agent then has to work out a deal with the buyer's agent for a split of that commission. The buyer's agent has no agreement or contract with the Seller.

Typically, for single family residential properties, a listing agent will want 6% of the sales price as their commission. This allows them to split that 6% with the buyer's agent, giving them 3% of the deal. Both agents then walk away with 3% upon the sale. If no buyers agent is present then the listing agent gets to keep the full 6%, since the seller will always still owe the 6% per the listing agreement. The seller does not save any money based on whether there is a listing agent or not.

So, if a listing agent tells you that you will get a better deal by not hiring an agent, then what that means is that they will make more money.
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yeah, but it seems like the complicating factor is that the property manager who has the landlord's info is also a REALTOR. Property manager seems like he will try to hose buyer/seller/or both to make sure he gets paid. I guess he could find owner's info through tax records or something. Ideally, he should contact the seller directly and speak to him. House inspection is a complete definite though.
 
I'd skip the property manager and contact the owner directly. Then he can decide whether to hire a realtor, but if you both only need a realtor to facilitate the deal he doesnt' have to sign up for 6%.
 
Part of my deal was no buyer's agent which again helped me at negotiations. I just used the 3 percent figure as standard negotiation starting point.

I seriously doubt your landlord is paying the property manager 6 percent to do this deal.




Another advantage to you is living in the house you know all of its warts, many won't show up on walk through inspection. They are not infallible. We had our landlord do $5,000 worth of wood rot/tile repairs that an inspector would have missed in all likelihood.

List everything you can think of and send it to him.
 
Thanks for all the info. I'm glad I asked.

We know our next door neighbors pretty well, and I think they know the owners from when they used to live here themselves. Maybe they can introduce us.

Then again, I think the neighbors want to buy our house, too, to flip it. This all just convinces me that I need to get my own agent.
 
Definitely get an inspector, and also figure out what the big-ticket renos would be in the near-ish future.
Roof, windows, furnace, electrical panel - those would be the big things I'd look for in a house that age (which I can say with confidence because I literally just put an offer on a house built in '55). Also, if there was ever an oil tank, whether or not it's been decommissioned and certified. They're not required to replace wiring -at least they're not in Oregon- but something the inspector should bring up, and something you should be able to mention in any kind of conversation regarding the offer itself.

Other than that, good luck!
 
Agree that the best price leverage would be to do the deal directly. However, if you are green on this matter, and you dont have a lawyer or agent friend who will hold your hand, then it might be better to have an agent. It may end up costing you more on the price, but it may save you in the long run as they might think of things that you want.

That being said, only use an agent if you can get a really good one. Real estate agents are only like required to take an 8 week course to get certified, so they vary GREATLY in experience, education and ability. They really do run the spectrum from excellent to terrible.
 
We bought the house we were renting. Had a shitty landlord/prop manager so we called the owner and asked if he'd sell or we were moving. Got a p good deal, plus we knew everything wrong after living there and having an inspection too. No real estate agents so saved that coin as well. And now have a golf cart. It's totes p sweet.
 
TheTwinAndreBen said:
Agree that the best price leverage would be to do the deal directly. However, if you are green on this matter, and you dont have a lawyer or agent friend who will hold your hand, then it might be better to have an agent. It may end up costing you more on the price, but it may save you in the long run as they might think of things that you want.

That being said, only use an agent if you can get a really good one. Real estate agents are only like required to take an 8 week course to get certified, so they vary GREATLY in experience, education and ability. They really do run the spectrum from excellent to terrible.
Click to expand...

Lolol this is not good advice
 
So we didn't pull the trigger in 2017 because the number was too high, but now the sellers have offered it below market and interest rates are better, so this is finally happening. Any recs for a reasonably priced attorney in Bethesda, MD area? The property manager/realtor is acting as a dual agent.
 
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