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My Renter Wants to Buy My House-What's the Next Step?

L

Lerose

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I've been renting out a house on a Lease with option to buy contract for the past 10 years. My renter called me this week to tell me she is ready to buy and is going to close at the end of the month. (Huh?) Apparently, she has finally been able to get a mortgage. Should I go through a realtor to close or go to a closing/title company? We live in 2 different states so is this something that I can do through the mail or do I have to be there for closing? Any advice is appreciated.
 
Wouldn't Hurt To See An Attorney

No need to go to a realtor -- that will just cut the realtor in for a big commission on a sale you've already made.

The reason an attorney's services could be extremely useful is the "with option to buy" feature of your 10-year-old lease. That is, real estate values in most places have gone way up over the past 10 years. What does your "option" say about the selling price of the property? What does it say about whether any or all of the monthly rental payments you have collected get credited toward the purchase? What other terms of that "option" have to be dealt with? Do you have a signed document constituting the entire rental/option agreement between you as landlord/seller & your tenant/purchaser?

Your sales transaction could be completely simple & totally straightforward, or it could be an extremely sticky wicket -- depending on all that stuff & maybe other factors too, I don't know.

I don't think you need a realtor, but you very well could need an attorney.

Good luck on completing the transaction & contratulations on selling your property.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.
 
I agree with Alan -- have an attorney (there are those who specialize in real estate) prepare the sales contract and other papers, there is no need for a realtor. You will probably need a title company/escrow agent (not positive about requirements when using an attorney) but you should be able to sign everything at a local office and/or use a courier service or overnight mail when needed. The money from the sale can even be electronically transferred to your designated account.

Good luck!

Forgot to add that although her loan may be approved and funded by the end of the month, she can't "close at the end of the month" unless you're involved too :)
 
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Read your option contract carefully

We have offered several homes to renters under a lease option but have yet had one to buy. In the contract we have seller will cooperate and provide what the buyer needs to close. Buyer pays all closing costs. Buyer will cooperate with seller if seller desires a real estae exchange into a new property,
We recently had two different buyers pass up opportunities to purchase property valued between 80 and 100 thousand dollars more than their opyion price. I can 't understand some people and their ways of looking at their future financially.
You may need a lawyer if the L/O document is not prepared properly or incomplete. Otherwise I would just close and count the dollars.
 
You need professional advice by someone- if you have a written "option to purchase, with price and terms", that is still in force- after 10 years, which would be quite an amazment- then you need a real estate attorney at the very least- to be sure all the terms of the sale are enforced. Your buyers lender will normally order the appraisal, inspections, and go through a title insurance company and they would handle the closing documents. If you agreed to sell at a certain price - 10 years ago- I personally would not like to see how much money I left on the table at this point- I would just sign the documents when they come and not ask any questions- as long as you are not required to make repairs for financing.

If, you do not, have a written "option to buy with agreed upon price and terms of sale" - You need professional services immediately. Property prices in most jurisdictions have gone up dramatically, the requirements for purchasing (disclosure documents, property inspections, lead base paint abatement if home built prior to 1978- to name a few)- Most Realtors, will take in account that you have a buyer in hand- when discussing thier fees- They are the ones with the comparable sale information- (most real estate attorneys do not have access to this information) they are the ones that daily deal with disclosure requirements, and inspections requirements- and if you live in another state- and are required by a lender to do repairs for sale- they know the contractors- And you will have someone looking after your interests - remember- the lenders client- is the buyer- not the seller. The client of the inspectors- are usually the buyer- the client of the title company is the buyer- The price you pay for a Realtor, can be small change compared to the problems you can get in when you are not represented. The courts are full of folks that didn't want to "pay all that money"-

Good luck with your transaction-
 
rlblack
Very good reply. Couldn't have said it better. You covered all the important, so often overlooked, points.
 
I am a Realtor

Do not pay a Realtor a dime.

You can buy a contract at Office Depot, Office Max, etc., that is specific to your state and is binding. No one could get out of the contract in a court of law. Then have your buyer get qualified through a mortgage company, then set up a closing with a title company.

Realtors are a waste of money. :eek: When you have already sold your house, why bring another party into the transaction? Realtors don't protect you from anything. I have been a Realtor for six years. If someone backs out of a purchase, the only thing you can usually get from them is the earnest money deposit, but most of the time, Realtors advise homeowners to let the people have all of their money back, unless it is keeping the owner from buying another house.
 
The present lease was updated yearly

rlblack said:
You need professional advice by someone- if you have a written "option to purchase, with price and terms", that is still in force- after 10 years, which would be quite an amazment- then you need a real estate attorney at the very least- .... -
Click to expand...

When this first started, I had a 2 year lease (without an option to buy clause) which I prepared from some software that I bought. The lease renewed again for 2 years at a time, than maybe 6 years into renting, my renter told me she was thinking of buying so then I changed the lease to add the option to buy clause and the first one was a 2 year lease with option to buy contract. When that one expired, I was somewhat glad she didn't exercise her option to buy because housing prices started taking off around then and the selling price was a lot less than comparable houses. So now the lease renews yearly and I adjust the price to what similar houses are selling for in the neighborhood. So I think we're good with the selling price as long as the appraisal comes back OK. Repairs could be an issue. In the lease, I'm responsible for taking care of any structural/electrical/plumbing issues etc. which I have done as problems arose. My renter hasn't said if she has scheduled an inspection (but she's been living in the house for 10 years so she should be aware of any obvious problems I would think) but it seems like an inspector always finds something that needs to be done (maybe so they can justify their fees? ;) )

Several people have mentioned contacting an attorney. Wouldn't an attorney cost more than a realtor? I'm kind of wondering what is the driving force to take this to completion? Who is responsible for making sure all the T's are crossed and I's are dotted? The mortgate company? The title/closing company? An attorney? A realtor? Me? :confused:

Looks like what I need to do pretty quick is to get a purchase contract in place using the info from the Lease with option to buy contract? Your thoughts?

Linda
 
Normally when people do a lease option, they know that the property could go up in value, or down in value. The owner takes that chance too. And a good option contract will fix the price, or the buyer shouldn't sign it in the first place.

Also, as to why people walk away from options after some time has passed, well, the job situation might have changed, or they don't really like the place after all, or they really would rather just rent.

Owning property is not for everyone--there's a reason it is called hoMOANership. :D If you own, you may have to decide how long you will live with bad electric, or a backed up sink or whatever because you can't afford to fix it right now. A renter just places the call and if it is health-related, the landlord/owner is required to fix within a certain brief timeframe. For some people, that's worth it.

If your state uses a lawyer for real estate transactions, then yes, you'd want one. But in states where it's just real estate agents and title companies, you generally wouldn't need one. The title/escrow companies and the county will tell you about any disclosures you need, as will the mortgage lender.
 
Excuse me, but ...

You wrote several, sequential but independent leases, all having options to buy?

You don't know (I assume, because you're asking) who's responsible for getting everything right?

Your house is worth more than you'd care to be sued for, I presume?

You know that commercial on TV where the doctor is about to talk the patient through self-surgery? "Shouldn't you be doing this?"

This is a no-brainer. Hire a real-estate attorney. Sheesh!
 
On the other hand, if the terms are fixed and there are no issues regarding selling price, amount of the 'rent' credited towards the down payment or other terms, you can still prepare your own contract, though it might be worth it to take your lease and the contract to a local attorney familiar with the laws in the state where the home is for a review. (Does a portion of all the rent for the entire 10 year period count towards the down payment, or just a portion of the rent from the current lease?)

The standard forms are pretty good these days.

Then you can just use a title company to do the closing.

When I bought the house next to mine in Florida, the sellers didn't list it with a realtor. We got a standard blank contract from a local realtor, I filled it in as the offer, they countered and we settled. We just used a local title company to handle the actual closing. It was all very simple and easy.

-David
 
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Icarus said:
On the other hand, if the terms are fixed and there are no issues regarding selling price, amount of the 'rent' credited towards the down payment or other terms, you can still prepare your own contract......The standard forms are pretty good these days.

Then you can just use a title company to do the closing.

When I bought the house next to mine in Florida, the sellers didn't list it with a realtor. We got a standard blank contract from a local realtor, I filled it in as the offer, they countered and we settled. We just used a local title company to handle the actual closing. It was all very simple and easy.

-David
Click to expand...

Today I called the company that I bought title insurance from when I purchased the house. This compamy also did the closing. They said that they were already working on it because the bank has already contacted them. Looks like this isn't so hard afterall.
 
Good deal. Sounds like the terms were completely spelled out in the lease and there are no issues.

-David
 
My husband and I had 4 rental houses. We were divorced 10 years ago. We split the rentals 2 and 2. He now has sold both his rentals and has paid capital gains on both houses. In addition to the capital gains he has to pay more because he depreciated the property. I am keeping my houses (and now they are paid off) because I dont want to pay capital gains. There are some rules that you can get around paying it or lessen your tax liability. I would consult my accountant for the details. The reason why I am telling you this is because maybe the tax liability isnt something you want to take on right now.

I was in real estate for 10 years. I have access to the Board of Realtors in my area. Maybe you have a friend that can do a CMA on it. I have seen appraisals come in a lot higher than they should have and (in your case if property values have gone up drastically in your area) too low. Because appraisers will go on sold listings. Appraisers are real famous for filtering appreciation.

If you feel comfortable about selling your house yourself w/ a title company and your state doesnt require a lawyer. Dont do it. If you are in the least uncomfortable on unknowledgeable. Hire an attorney or realtor.
 
Contact references and get a good real estate attorney. If you're not an expert, hire one. It's money well spent. It's called sleep insurance. We sold our house FSBO and had an attorney do all the paperwork. We spent around $300 about seven years ago. I wouldn't hire a realtor because you already have a buyer. Realtors are good at finding buyers, but for legal advice I'd prefer an attorney any day. It's like buying car insurance, you hope you never need it. Spending the money for an attorney now may save you big bucks in the end. If you don't use and attorney and things go wrong, it could be costly.
 
It seems like most people here don't understand how the lease to purchase contract works. It's both a rental contract and a purchase option contract with terms set by the landlord/seller. If the renter exercises the option to purchase prior to expiration of the contract, all terms have already been set, since the "option" part of the contract includes all terms of the sale, including the selling price.

All of the negotiation of the sales price, terms, including cost of the purchase option, etc, must be vetted and agreed upon at the beginning of the rental term. Once given, the option can usually be exercised at any point during the term of the contract.

-David
 
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talkamotta said:
My husband and I had 4 rental houses. We were divorced 10 years ago. We split the rentals 2 and 2. He now has sold both his rentals and has paid capital gains on both houses. In addition to the capital gains he has to pay more because he depreciated the property. I am keeping my houses (and now they are paid off) because I dont want to pay capital gains. There are some rules that you can get around paying it or lessen your tax liability. I would consult my accountant for the details. The reason why I am telling you this is because maybe the tax liability isnt something you want to take on right now.

I was in real estate for 10 years. I have access to the Board of Realtors in my area. Maybe you have a friend that can do a CMA on it. I have seen appraisals come in a lot higher than they should have and (in your case if property values have gone up drastically in your area) too low. Because appraisers will go on sold listings. Appraisers are real famous for filtering appreciation.

If you feel comfortable about selling your house yourself w/ a title company and your state doesnt require a lawyer. Dont do it. If you are in the least uncomfortable on unknowledgeable. Hire an attorney or realtor.
Click to expand...
An escrow company with title insurance too is good enough in CA but I would hire an attorney in other parts of the country to make sure all documents are legal and complete.

http://www.zillow.com/

This is a helpful web site for people who have no access to the Board of Realtors. It isn't accurate for all real estate, I have read on the two forums here but it was accurate for where we live. It will give you an idea if you sold it for the right price.
 
A tug thread for everything.

Good luck and contratulations on selling your property. I am selling a house at the moment also and thinking about doing a rent with option to buy for someone if the property does't sell by the end of April... Glad to see that they took the buy option and it works for you. I am thinking about this kind of deal as I would imagine you get a more dedicated renter.
 
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