Buying a house... weirdly

November 13, 2013 2:26 PM

I want to buy the house I'm renting. How do I even start?

I've been living in this house for a few months now, and I really like it. Good location, quiet, inexpensive to maintain, and I love the neighborhood. My landlord plans to put it on the market in January. I've mentioned that I'm interested, and he's given me a very informal quote that's affordable enough that I can pay cash.

Of course, that takes the bank out of it, which is usually how the process would start.

So... where do I start the process? I know I've got to get an inspection. Do I need an independent appraisal as well? Who should I contact to manage the deal, a real estate agent or a broker or an attorney... ? Who do I contact first?

I've never bought a house before. I've been keeping an eye on the real estate market, and I haven't found anything this well-suited to me for anywhere near the price. The price being offered is comparable to recent sales in my area; a little lower, actually. I'm prepared to walk away if the deal doesn't work out. But how do I make sure this goes smoothly?

posted by MrVisible to Home & Garden (12 answers total)

Best answer: Consider hiring a real estate lawyer who specializes in this kind of thing. I don't have any direct experience with this -- just bought a single house a while back -- but my understanding is that they charge either by the hour or a fixed fee, and of course they are duty-bound to focus on your interests.

Also, consider one of the "for dummies" books, or similar, to understand the basics.
posted by alittleknowledge at 2:31 PM on November 13, 2013 [1 favorite]

Best answer: My only qualification being having bought a few prices of property in the past ten years, I'd say all you must have is a good property lawyer. I'd start there. We did a fairly complicated set of property transfers recently between family members, no banks needed, and the property lawyers guided us through the process.

You may want a bunch of things including a land survey and an inspection, but let the lawyers tell you what paper work is needed.

If both sides are satified with the price and the condition of the property, things like a home inspection and independent valuation may not be required. You definitely don't need a broker. You may still want a home inspection, for your own piece of mind, but they aren't generally, in my expereince, required. Still, listen to what your lawyer has to say.
posted by bonehead at 2:35 PM on November 13, 2013 [1 favorite]

Best answer: Appraisals are for mortgage lenders that want to be sure the house is worth what everyone says it is. You wouldn't need one unless you want to try and make a lower offer to the landlord at this informal stage. An insurance broker might want to see one, though, so be sure to check with them.
posted by JoeZydeco at 2:38 PM on November 13, 2013 [1 favorite]

Best answer: I bought a condo that I was renting. If you know anyone that's a realtor, or can recommend a realtor, it might be helpful so you can get better comps on other recent sales in your neighborhood, and help you negotiate (if you're comfortable - it can be a little tricky with a landlord since you already have a relationship with them)

Definitely get an inspection. You can adjust the price accordingly, if there are any issues that come up. You'll have to pay for the inspection yourself. The good thing is that you have probably live in the house a while to know what any issues are, but still get a good, thorough inspection. You can probably skip an appraisal.

Remember to get your deposit back! Work it out in the price somehow - as a credit, or lower price.
posted by raztaj at 2:38 PM on November 13, 2013 [1 favorite]

Best answer: IANAL. I purchased my current home using a private mortgage (no bank), and had previously discussed making a no-agent bid on another home.

1) If you aren't going to involve a real estate agent, you need to go look at the relevant state laws ASAP. In NYS, for example, all parties in the deal must have a lawyer. I'd suggest getting a lawyer in any event to handle all of the documents involved in closing. (Some of those documents are the owner's responsibility; again, the lawyer will explain who needs to do what.)

2) Again, depending on your state, you should expect to spend a not-inconsiderable amount of cash on closing costs (for example, taxes, deeds, etc.).

3) You want a good inspector (look for reviews--Angie's List will have some). If your house has been a longterm rental, remember that the landlord will probably have made the cheapest functional repairs possible, and plan accordingly.
posted by thomas j wise at 2:39 PM on November 13, 2013 [1 favorite]

Best answer: I have done this (but not paid cash). I agreed on a price with the landlord and paid a real estate attorney about $3,000 to make sure we did everything correctly. We had no realtor fees or anything. It was not particularly difficult.
posted by tylerkaraszewski at 2:39 PM on November 13, 2013 [2 favorites]

Best answer: I am a real estate broker , and while it might be nice to have one as basically our job is to walk you through all of the steps in your home buying process, it is probably not going to be in your best interest to hire one of us here--if anything this would just irritate your landlord/seller since typically we are compensated on the sell side. Unless he already has a broker he is using for his plans to put the house on the market? If he does, and if you would be dealing with that broker, then yes, I would advise you to find one of your own who is representing your interests in the transaction.

Assuming you and your landlord will be handling this without brokers:

1) First and foremost, yes, you need a competent experienced real estate attorney. Ask around and find someone who is boss in your location.
2) You and your landlord will come to an agreement on the price. His attorney and your attorney will hash out the details. Your attorney will be your guide here. Some things you will need to consider are contingencies (for example the sale will often be contingent on having an inspection done and the results being satisfactory to you--so if it turns out the house needs $20k of repairs that you don't want to do and that the landlord won't give you a credit for, you can back out). A contract will be drafted, you will sign, and then your landlord will sign. You may need to put money down on contract signing--in NYS this is typically 10% of the contract price.
3) Ideally your contract IS contingent on an inspection and you have a qualified inspector out to check things out.
4) Appraisers are sent by mortgage companies to verify that the house is worth at least what they are loaning you. In my experience, they almost always appraise at the contract price and would not be helpful to you here.

tl; dr: find a great attorney and they will be able to guide you through this process. If you are in NYS and want some free advise, feel free to memail me!
posted by msjoannabanana at 2:48 PM on November 13, 2013 [2 favorites]

Best answer: In addition to getting your deposit back, also don't forget to pro-rate rent. For example - if you paid November's rent on the 1st, but your sale/closing date is the 20th, you should get part of your rent returned back to you, for the remainder of the month.
posted by raztaj at 2:57 PM on November 13, 2013 [1 favorite]

Response by poster: These are great answers. From what I'm seeing here, my first step is to research a good real estate attorney, engage their services, then my next step is to listen to them.

Sounds great. I'm off to do the research. Thank you all!
posted by MrVisible at 3:55 PM on November 13, 2013

Best answer: Another point to remember is that if you are not involving a broker, who would charge a commission, then you should be able to lower the price of the house by at least half the going commission rate in your area.
posted by cacao at 4:07 PM on November 13, 2013 [1 favorite]

Best answer: I agree with the others. Don't need a realtor, do need a real estate attorney, do need an inspection, don't need an appraisal.

But do look at realtor.com and/or zillow.com (or the equivalent in your country if you are not in the U.S.), not to see what's for sale -- that just tells you asking price. Look instead at recent sales prices -- the final number they ended up closing at. Be very specific about only look at houses in the same area with the same number of bedrooms, etc. Ignore outliers. That should give you a rough estimate of what the house is worth.

I did this without a broker recently, and it was no biggie, but then it was not my first house.
posted by ravioli at 4:08 PM on November 13, 2013 [1 favorite]

Best answer: I have done real estate investing for years. I currently own 20 homes (and rent 19).

1. Make a deal with the guy. You said "very informal quote." Don't hire a lawyer until you make a deal with the guy. Print out a basic contract (research it a bit), and get a 10% deposit, and go see the guy. Lay your cards on the table, and make a deal. That is how you buy real estate.
Here is a basic real estate contract. Hand write a note in the margin saying, "this binder is to be reviewed by our lawyers and memorialized in a final contract," and both of you sign that note. Make sure the binder-contract gives you a reasonable inspection time and that you receive clear and unencumbered title. Make it clear you want title insurance.

2. Once you have a hard hand shake deal, with signed papers and a receipt for a deposit, then go to a lawyers office. Bring your paper-work and the rest of the money. Ask to review what you have, make it more formal, make any changes, and get it signed again. Give them the remainder of the money to hold in escrow.
(There is no point in paying for a lawyer until you make a real hand-shake deal with this guy. If you go to a lawyer first, you still have to make the deal with the guy. You might pay a lawyer to draft a contract, only to find out the guy never wanted to sell. Make a real deal with the guy, then pay a lawyer).

3. Then hire a Title Company. Buy title insurance. Your lawyer can help you find this.

4. Get adequate property and liability insurance lined up to take effect immediately upon closing.

5. Get a serious property inspection done. If there are issues, get contractor quotes to repair quickly. Really check the health of the building.

6. Real due diligence is to call the county property appraiser, and make sure there are no liens against the property - and call county code enforcement, make sure there are no outstanding building violations against it. Your title company might do this for you.

Your lawyer can help you with a few other details, but these things are the big ones.

One final note, prepare yourself for the negotiation with the guy. Without realtors negotiating the sale by proxy, then the real estate deals is about getting the hand shake, making the deal with the other guy mano a mano.
posted by Flood at 4:20 PM on November 13, 2013 [6 favorites]