Bottom Line Up Front: My current tenant actually wants to buy my rental property. Can I do this myself?
Backstory: In 2008, I bought and lived in the house for a year solo, GF moved in in mid 2009 and we got married in late 2010. We continued living there until early 2014 when we found "our" house. Tried to sell in 2014 but market was cold. After six months of vacancy and pursing renters, we were able to get a tenant and she and her kids have been there for the last 4.7 years. This was all pre-MMM.
Current story: I live in "our" house but I am solo again as my wife passed away in late 2015. Renter has been mostly great for the past five years, but this winter I decided to sell the house at the end of the lease on 30 Sept 19 (I did offer to sell to her at that point, to which she said she wasn't interested) . Basically I’m at a point to get the house off of my balance sheet, so to speak. My renter and I discussed the fact that I was planning to sell, which she said she expected, and later she told me that she was preparing to move out this summer. This was a bonus for me because I wanted to get the house on the market before school starts in the fall. Well, many tornadoes hit our area and the house/apt/townhome she was looking at was severely damaged and is no longer an option for her. I don’t know if that swayed her decision but, nonetheless, she came to me via email on Thursday saying that she would now like to buy the house from me and asked if I was amenable to that (I said yes). In a later email she also tells me that she is taking a First-Time Homebuyer class (maybe at our local credit union or a church) and will start the process of pre-approval. I hope a bank will pre-approve her because I am not at all interested in a lease/rent-to-own option as I want the property off my books (FHA probably won’t let this happen anyway).
Questions:- Is this really as easy as it seems or am I kidding myself?
- Can I actually do this myself without a realtor, from a documentation perspective?
- Where can I get the forms? Which ones do I need? Does the bank/title company do most of the work?
- Should I hire my realtor friend to help with the forms? I don’t want to pay 3% commission for this unless it’s extremely worth it. I also don’t want to damage the friendship because I was going to hire her to put the house on the market this fall. She knows about this new situation and was joking with me about losing "future" commissions. What would be a reasonable charge if I were to hire her, something like 1%? Could this eliminate the need for me to get an independent appraisal?
- I think it’s highly unlikely, but what if my renter is trying to drag out time beyond the end of the lease period? There is a month to month clause in the lease, so I suppose this would keep her paying rent until she takes ownership.
- What documentation is required for taxes (recapturing depreciation)? All of my numbers show that this is going to be a loss but maybe this question is better asked in the taxes thread.
The House -Market Value: ~$125,000 based on my look at comps but I may get an independent appraisal soon. Zestimate is $136k-ish and Trulia around $140k. Both seem ridiculously high to me for that house, in that neighborhood.
Original Purchase price: $103,875 (in 2008), refi "price" $108k (in 2010)
Original Mortgage Amount: 2010 refi - $104,295
Interest Rate: 5% - FHA, Initial rate was 6.25% - FHA
Mortgage Term: 30 yr
Term remaining: 20 yr, 4 mon
Amount remaining on mortgage: $86,068
Gross Rents: $945 per month
Principal and Interest: $561.73 per month - I send $900 per month so $1.85 extra goes to P.
Taxes and Insurance: $338.27 per month (this is my escrow payment)
HOA costs: $125/yr
Deferred maintenance notes: There may be some roof work required but I just heard from my insurance adjuster (house was affected by the Ohio tornadoes) and I may get some financial support from the insurance company. This situation will eliminate my need to paint and re-carpet the house before selling.
Anything else special or unique in regards to the numbers of the property: Probably pretty close to, if not the smallest house in the neighborhood, though Zillow would probably disagree with me. The neighborhood is filled with split and tri-levels.