Renter asked to buy

[vivian]

Long story short, we became long-distance landlords without planning on it. A job change forced a relocation right as the real estate crash happened. We tried to sell but couldn't. The rent covers our expenses, but not much more than that. I've heard that housing prices have rebounded some, but the home is still worth significantly less than what we paid for it. But, we do think it is at least over what we still owe. Recently the renters have approached us about whether we ever thought to sell the house. We don't really want to be long distance landlords but also are having a hard time getting around not getting all our down payment money back.

Any advice you can give would be helpful. We've never sold a house before so we don't know what is involved. We are wondering how you ensure all the legal protections are there if we sell directly to the renter without getting a realtor. How do we decide what a fair price would be?

[Daleth]

You'll need a real estate lawyer to draw up the sales contract. She could also draw up the offer but ideally that should be done by the buyer's lawyer. Obviously it's easier and much less potentially contentious, though, if the buyer is ok just having your lawyer draw stuff up.

Also, for them to get a loan they will need a down payment, closing costs, and enough money to last them however many months (many banks require 3 months, some require as much as 6) of housing expenses. If they don't have that much money saved up, you could consider selling it to them on a land contract--which is basically rent-to-own. In a land contract, some fraction of each month's rent payment counts as down payment, so that by some point in the future (that point being defined in the contract) they should have enough "equity" in the house to get a mortgage. Again, you will REALLY need a real estate lawyer in the state where your house is to get this done right.

[the fixer]

Investigate selling it to them on a lease/option. If you don't need the money right away, this is a great way to make some extra money on the sale. I know very little about this, just what I've read in Schaub's real estate book.

[arebelspy]

Investigate selling it to them on a lease/option. If you don't need the money right away, this is a great way to make some extra money on the sale. I know very little about this, just what I've read in Schaub's real estate book.

"Lease option" just means "rent to own" - they're already renting, so you'd just delay the purchase part of it, but when they exercised their option they'd go through with the purchase - and OP would be in the same situation they're in now (not sure how to do it).  Actually it wouldn't even push back that part, as they'd want to go over the sales contract as part of the option (separate from the lease), most likely.

I'm a fan of l/o's, but I don't see it as too applicable here, unless you're doing something particular to spread out the tax hit.

Long story short, we became long-distance landlords without planning on it. A job change forced a relocation right as the real estate crash happened. We tried to sell but couldn't. The rent covers our expenses, but not much more than that. I've heard that housing prices have rebounded some, but the home is still worth significantly less than what we paid for it. But, we do think it is at least over what we still owe. Recently the renters have approached us about whether we ever thought to sell the house. We don't really want to be long distance landlords but also are having a hard time getting around not getting all our down payment money back.

Any advice you can give would be helpful. We've never sold a house before so we don't know what is involved. We are wondering how you ensure all the legal protections are there if we sell directly to the renter without getting a realtor. How do we decide what a fair price would be?

First you have to decide if you even want to sell.  Sounds like you're on the fence.  Then you need to get comps (and possibly an appraisal) to find out what it's worth.  Then I'd probably suggest you find a Realtor who will work for 2.5-3% and represent both you and the buyer (you'll both have to sign some disclaimers around this).  If it's your first time selling a house, it may be worth that money for their guidance through the process.

Otherwise if you're insistent on DIY, get a NOLO legal book on the topic, puzzle through it, then take the completed contract you're happy with to your lawyer.  Also check with your local Realtor association to get a copy of their standard contract for your area for ideas.

[tryan]

How much was your down payment?  If I was loosing more than 15% I'ld hold ... the future (5 years) looks better than the past  (5 years).

Less than 15% ... bail (while you have a buyer with NO realtor commission)

[arebelspy]

the future (5 years) looks better than the past  (5 years).

Really?  In most markets the gains in the last 5 years (from 2009 to 2014) have been quite large (maybe dipped in 2010, then rose for about 4 years straight, including huge jumps in 2012 and 2013).

I'd be ecstatic if the next 5 years of real estate was better than the past five, but I'd be very surprised if that was the case.

Curious to hear your thoughts on that though, tryan.