Renting a home is a great alternative for those who are new to an area and are not quite sure where they want to plant their roots. It’s also the first step towards becoming a homeowner while getting one’s finances in order. But what happens when you end up falling in love with the property you are renting? Approaching your landlord about buying the current property may seem intimidating but here are some ways to guide you through.
Have a pre-approval ready to go: This is pertinent towards any home you are interested in purchasing. However, this shows your landlord you have given this some thought and you are serious about buying from them. It also shows that you are a qualified buyer and can make the transaction happen rather than just inquiring about it. Speak with a trusted lender before bringing up the subject to your landlord. A meeting with a lender will let you know if you qualify, how much you qualify for, and how much you want to spend. There will certainly need to be some conversations about purchase price in the future so you may want to either have an undisclosed pre-approval amount or have it issued for the current homes assessed value.
Do a Comparative Market Analysis
Once you are aware of what you can afford (and what you want to spend) create a comparative market analysis (CMA) on the home. This will give you a price range of what the properties in the neighborhood are currently selling for and it will also educate you on what offer you should be willing to make. Having this knowledge will make you seem more serious to your landlord. When researching home sales make sure that you are specifically looking for the amount that homes have sold for recently. The list price of a home that is currently on the market does NOT do nearly as effective of an evaluation as the price at which a home sold. Most appraisers would only consider a home that sold within the last six months and mostly only look at homes that were publicly advertised on a Multiple Listing Service (MLS).
Hire a Real Estate Agent
It’s always important to have legal representation. A Realtor will take you through the transaction process from contract to close. They will also advise you on what offer to make, what to ask for, and any contingency that best fits your needs. If you are not comfortable with running your own market analysis OR if you just want them to confirm or deny comparables, they would easily be able to help. Most landlords have pre-existing knowledge of the real estate process so you want to make sure you’re protected and know your rights and responsibilities. In a traditional setting, there is no expense on the buyer’s side of the transaction to have the assistance of a Realtor as it is customary to have commissions be one of the seller’s paid closing costs. Given that this is an unconventional setting this may be a deeper topic of discussion. Additionally, if the property has been managed by a real estate brokerage there may be explanations of brokerage representation that were signed in agreement at the start of the lease. To find a trusted Realtor, refer to Homes.com to find local Real Estate Agents in your area.
Have a Conversation with Your Landlord
When you are ready, bring the conversation to your landlord’s attention. It’s likely best to schedule a time to talk and to prepare the landlord that you would like to talk to him/her about the idea of purchasing the property. Your landlord may be ready to give up responsibility of the property but hasn’t really given much thought to the idea of selling until you bring it up. Scheduling an appointment will give them an equal amount of time to consider and evaluate potential sale price. Having a monetary figure and a pre-approval in hand gives you a more compelling argument as to why you’d like to have the opportunity to purchase the property. You never know until you have the conversation.
If you are currently renting a home that you love and would like to purchase, it would certainly make the “move” much easier. No need to go through all that stress of packing and unpacking. It could make for an easy transaction for the landlord as well. When you are ready to pursue the possibility make sure that you are prepared on the front end. Get yourself pre-approved by a lender, research the market comps, consult with a realtor, and then schedule a time to meet with the owner. Worse case scenario is that they say no. In that case, at least you are prepared and ready to purchase OR have given notice to the landlord that if they were ever to want to sell that you are interested.