Author Topic: Buying direct from landlord -how much of a discount to ask for?  (Read 3816 times)

curlyfry

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Decision Made!
I'm going to offer to buy the 2007 condo we have rented for the past 5 years. The last few years the landlord has asked us if we want to buy it (& said "he'd give us a deal.")  They've tried to sell before without success. They are in their early 70's & they own/live in another condo downtown.


Question - How much of a Discount do I give myself when I make an offer?


*Condo Appraised at $375,000
*Subtract Realtor Fees (7% to first $100,000, remaining @2.5%)  = $360,431

Can I subtract anything else?  The $300 for the appraisal? (I'd be happy to send them the appraisal if that makes them more comfortable with my offer.)   What about Ease of Sale Factor

I'd be happy for the closing date to be May 1st which is exactly when my lease runs out (currently renting for $1650/month). Realistically if they sell it through a realtor they would likely have the place empty for a few months

So do I just offer $360,000?   No realtor means I save 15k & they get it sold easily.

I realize there really aren't any big deals to be had.  (ie. I won't pay more than it's worth & they seller wouldn't sell if for less than it's worth.)

Or am I being too nice?  Does it make more sense to go in a bit low so they return with a counter?

Thanks for your help!

(modified feb 29th to make #'s accurate)
« Last Edit: February 29, 2016, 12:38:16 PM by curlyfry »

sammybiker

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #1 on: February 28, 2016, 11:48:36 PM »
Absolutely offer below.

I would start at the beginning of your lease and count back to current date - what have you paid in total rent, how rough have you been on maintenance/repair calls, what taxes has the landlord been paying, etc.  Get an idea of how much cashflow they've captured over the last 5 years. 

It sounds like they want an easy sale and are motivated (haven't been able to sell & their personal age) and as you've been great tenants for the last (5) years, they may provide additional discount.  I'd take the above numbers into account and ask them what they could come up with for a quick sale price. 

If you're pre-qualified, use this to your advantage and counter the best they can do with a reminder that you've been great tenants, have already put X amount over the last (5) years and would be interested in making a quick sale in May, saving them typical realtor fees PLUS all the other inspection/repairs that an outsider buyer may require and not to mention vacancy costs (3mo+ @ $1650 + utilities, etc)

If you're not pre-qualified for the mortgage, I'd do so prior.  You have the strong position here and the landlord/seller has already signaled willingness to be flexible.

As a landlord myself, I think you're offering some true value here with the easy sale.  Be reasonable but at least start-off a little more aggressive and pick-up some equity with this purchase.  It sounds like you've poured $80k+ into gross rents over the last 5 years...that should stand for something.

« Last Edit: February 28, 2016, 11:51:12 PM by sammybiker »

sammybiker

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #2 on: February 29, 2016, 02:13:09 AM »
Exactly.  Ask them where their price point is and let them give a number first.

You're definitely holding the power - looking forward to hearing updates.

I'm a red panda

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #3 on: February 29, 2016, 06:40:32 AM »
We sold to our tenants. They had an appraisal done, we all assumed we could sell for that much, and then we split the difference on what a realtor would have cost us.  So we sold below market, but ended up getting more than if we listed the property; they paid less than if we listed the property.

We were highly motivated to sell, but as a tenant they were also really motivated to not have to move.  I wouldn't go too low for that reason; the landlord could always try to sell it away from you. So I disagree you hold "all" the power.


JustGettingStarted1980

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #4 on: February 29, 2016, 07:47:32 AM »
Acquaintance down the street was going to put their house on the market. I approached and discussed something similar to above, to do an owner to buyer direct sale at a fair market price, and split the realtor fee. I valued their house at around 300K, which was consistent with similar sales. So I would have ended up paying 291K or so for the place.

So I asked for a number, and he gave me 345K! At which point I went and bought another house for 300K.

He kept on market for >1 year, got desperate, eventually sold for 285K, and paid 17K in realtor fees at the end.

marty998

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #5 on: February 29, 2016, 01:12:37 PM »
Bloody hell those realtor commissions are high.

It's a wonder anyone uses them at all at that price.

sammybiker

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #6 on: February 29, 2016, 03:21:22 PM »
Why not come back lower than $360?  It's a negotiation, not an insult.

You mentioned them being unable to sell when they tried in years past - were you able to confirm their asking price when they couldn't get it sold?

sammybiker

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #7 on: March 02, 2016, 03:04:20 AM »
Ah, sorry - didn't know you were a BC resident...Victoria is nearly as nuts as Van as far as I'm concerned.

That said, it was worth a try and it looks like you got some wiggle out of it.

Thanks for the update, gl with the decision.

adamcollin

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #8 on: March 02, 2016, 04:44:23 AM »
So, did you make an offer?

AH013

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #9 on: March 02, 2016, 12:42:53 PM »
They said they have a friend who is a realtor who would sell it commission free anytime.. 

I'll admit, I'm not an expert on Canada realtor practices...but he's an idiot if he thinks it will cost him $0 to sell the house in this manner.  Even if the realtor does him a favor and doesn't charge him for the selling realtor's effort, he's just the seller's agent.  The buyer's agent will still want their full commission, which is half the total (at least in the US).  Also, even though an agent may waive their fee (for a friend), the agency they work for (RE/MAX, Sutton, etc.)  will not, and they are usually entitled to 40-60% of the seller's commission.  So take that $15k, $7.5k goes to the buyer's agent, $3,000 goes to the seller's agency, and $4,500 is what the realtor may waive as a favor.  All in all, it will still cost him ~$10,500 in realtor fees to sell his home.

At best, the realtor is a completely independent agent, and will forgo working with buyers who have their own agent (to avoid cutting that agent in on a commission).  There are still minimum fees to list the house and do marketing and such.

curlyfry

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #10 on: March 02, 2016, 12:44:46 PM »
Thank you so much!!!   (I never even thought of that!!!! )   

You literally just saved me $4,000.     

I used your math & put in an offer for 365k  (but I'd pay for upcoming water tank replacement which is just under 1k) & it was accepted. 

10k under assessment is a deal in my books.  Thanks everyone!

(Edited with update)
« Last Edit: April 24, 2017, 12:00:35 AM by curlyfry »

waffle

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Re: Buying direct from landlord -how much of a discount to ask for?
« Reply #11 on: March 02, 2016, 03:53:41 PM »
Have you considered whether you should even be buying? I haven't crunched the numbers, but it seems like if you are paying 1650/month currently you aren't going to save anything on your mortgage payment, but will then be responsible for taxes, insurance, and maintenance. It just doesn't seem like a good deal to me.