Real Estate

Tenant approaching landlord to buy the property?

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  • Jul 27th, 2020 1:25 pm
[OP]
Newbie
Sep 23, 2017
90 posts
48 upvotes

Tenant approaching landlord to buy the property?

Hello

Looking for some ideas on how to approach this situation.

We have been renting for almost 3 years, and really like the area and the home we are in right now. From one of the conversations with our landlords they have mentioned that as soon as we move out the home will go on the market. They don't want the hassle of finding new tenant as they are working abroad.
For the time that we have rented, we managed to collect enough funds to put down a 20% down payment, and will soon be either looking for a place to buy or approach landlord to buy this property.

From what I understand we might get a better deal from buying this home for the following reasons.
1. Seller will save on commission almost 50k
2. Seller will have no hassle of preparing and renovating property for sale.
- this home is about 12 years old and was originally build with basic features that are showing wear and tear. Probably will need at least 50 - 100k to bring it to the top sellable condition if they want to get top dollar.

Where would you start this process? I understand we will need to get an appraiser to get the property evaluated. Would you suggest for each party get an appraiser? Or should we get home evaluated before approaching landlord with this idea?
How about the agreement of purchase and sale? Would that be done by a lawyer?

Also like to get some input from landlords, if someone approached you to buy property that you plan to get rid of anyway, how would you handle the price considering savings on renovations and re commissions, time to list and sell the home?

If location is important this is in Richmond Hill Ontario

Thanks for any input :)
11 replies
Deal Addict
Jun 20, 2011
2063 posts
1015 upvotes
VANCOUVER
It doesn't hurt to ask. Seems like a win win situation.
Member
Apr 17, 2016
358 posts
267 upvotes
Toronto
My parents recently sold a rental property to the tenant. My parents got an appraisal first from a realtor (they paid realtor to provide the appraisal), then approached the tenant with the idea of a private sale. Both sides were happy with price, and they paid a small flat fee to realtor to do up paper work. Note that this is in a small town, Ontario, so different market than GTA. I am sure there are other ways to go about the purchase agreement (real estate lawyer could likely do so).

I would suggest first to talk to landlord and let them know your interest, then discuss appraisal. Let seller pay for appraisal and if you don't agree with price, counter back. You could then also get your own appraisal if you choose to do so.
Member
Oct 21, 2013
296 posts
148 upvotes
waterloo, on
Its a win win situation for both parties. You only need a good idea of the property value which can be found out by comparing the sales in the neighbourhood. Or get free market evaluation from any agent. Once you reach a price, reduce it by commissions and make an offer. Use lawyer to do the paperwork.
Serving Kitchener/Waterloo/Guelph/London/Hamilton/Niagara and surrounding areas
Deal Guru
Feb 9, 2009
12360 posts
11249 upvotes
DealsFreak wrote: Its a win win situation for both parties. You only need a good idea of the property value which can be found out by comparing the sales in the neighbourhood. Or get free market evaluation from any agent. Once you reach a price, reduce it by commissions and make an offer. Use lawyer to do the paperwork.
in this case pay the realtor something for their time...
Deal Addict
Nov 13, 2013
3518 posts
2129 upvotes
Ottawa
Yeah market value a bit tricky to determine. Some of your math is a bit off. There is no way a property worth about $1million that is 12 years old needs $100k in renovations to be sellable.
If it's 12 years old I assume it's in an area where the surrounding houses are of about the same age? You can look at comparable sales and get a good idea.
In the end a house is worth what someone will pay and what someone will accept. Frankly your hassle is a lot larger than theirs. You have to move and find another house and compete with others so I suggest being a bit more accommodating if you want to make sure it will work. A fair offer from you is likely to be accepted. If you make a lowball offer you might not get a second chance and they might just put it on the market.
Member
Jul 19, 2018
274 posts
168 upvotes
Mississauga
fabricatordog wrote: Hello

Looking for some ideas on how to approach this situation.

We have been renting for almost 3 years, and really like the area and the home we are in right now. From one of the conversations with our landlords they have mentioned that as soon as we move out the home will go on the market. They don't want the hassle of finding new tenant as they are working abroad.
For the time that we have rented, we managed to collect enough funds to put down a 20% down payment, and will soon be either looking for a place to buy or approach landlord to buy this property.

From what I understand we might get a better deal from buying this home for the following reasons.
1. Seller will save on commission almost 50k
2. Seller will have no hassle of preparing and renovating property for sale.
- this home is about 12 years old and was originally build with basic features that are showing wear and tear. Probably will need at least 50 - 100k to bring it to the top sellable condition if they want to get top dollar.

Where would you start this process? I understand we will need to get an appraiser to get the property evaluated. Would you suggest for each party get an appraiser? Or should we get home evaluated before approaching landlord with this idea?
How about the agreement of purchase and sale? Would that be done by a lawyer?

Also like to get some input from landlords, if someone approached you to buy property that you plan to get rid of anyway, how would you handle the price considering savings on renovations and re commissions, time to list and sell the home?

If location is important this is in Richmond Hill Ontario

Thanks for any input :)
$50 - $100k sounds a little too much to bring it to top sell able condition unless the property is completely run down and needs substantial amount of work.
Deal Fanatic
User avatar
Oct 16, 2008
9732 posts
4044 upvotes
Vaughan
fogetmylogin wrote: Yeah market value a bit tricky to determine. Some of your math is a bit off. There is no way a property worth about $1million that is 12 years old needs $100k in renovations to be sellable.
If it's 12 years old I assume it's in an area where the surrounding houses are of about the same age? You can look at comparable sales and get a good idea.
In the end a house is worth what someone will pay and what someone will accept. Frankly your hassle is a lot larger than theirs. You have to move and find another house and compete with others so I suggest being a bit more accommodating if you want to make sure it will work. A fair offer from you is likely to be accepted. If you make a lowball offer you might not get a second chance and they might just put it on the market.
+1

OP, remember this, you approach them.
...
Deal Fanatic
User avatar
Sep 14, 2006
9405 posts
2246 upvotes
Like what others are saying, the renovation cost of $50-$100K seems unreasonable and I don't think the owners would be doing that just so they can sell it. They may spend a little to clean it up but you won't sound convincing if you're trying to persuade them into selling it to you with this argument. The commissions savings would definitely be the number 1 reason to do a private sale. Good luck and all the best.
TEAM CANADA!!!!!!!!!!!
Deal Addict
Jan 12, 2017
1622 posts
949 upvotes
In the GTA, this will depend entirely on your relationship with the seller/landlord.

You said the landlord is located abroad. Do they invest in RE on a regular basis? Are they simply looking to move on? This will make a difference.

Given Richmond Hill, listings and their prices are quite high, but actual sales may not line up. Further, DOM for the RH area is quite a bit higher than elsewhere in the GTA. I would say in your favour, but do the sellers realize this? In fact, prices in RH still have not recovered to 2017 levels. Most don't realize this and have unrealistic expectations.

On the other hand, search for sales in the last 60 days in your area on Bungol. Are you prepared to pay in this range? It might be higher than you expect. You can't expect to discount the entire agent commission of 5% - that results in no financial benefit to the seller. Dealing with some asian contractors, especially for aesthetic improvements, you would be shocked how much work you can get done for $5-10k.

I would suggest getting an idea of what the area pricing is - condition of the home, unless drastically outdated, damaged or spectacular, means little in terms of pricing adjustment these days. I wouldn't bother with an appraiser unless you feel the landlord would want one. In a situation like this, they're really a waste of money except to go through the actions. If you both get appraisers, you're just setting this up for a confrontation. Confirm financing, then run the idea by the landlord casually. I would suggest asking them if they had a price range in mind. If they're open to the idea in a price range that will work, be ready to purchase and don't drag your feet. While it may take more time, it is probably less hassle for them to call a RE agent and get the sale fully coordinated.

There are agreement of purchase and sale templates available from the real estate board that you can probably use. Definitely find a lawyer to review it with you before you send it. In general, it is pretty straight forward.
fabricatordog wrote: Hello

Looking for some ideas on how to approach this situation.

We have been renting for almost 3 years, and really like the area and the home we are in right now. From one of the conversations with our landlords they have mentioned that as soon as we move out the home will go on the market. They don't want the hassle of finding new tenant as they are working abroad.
For the time that we have rented, we managed to collect enough funds to put down a 20% down payment, and will soon be either looking for a place to buy or approach landlord to buy this property.

From what I understand we might get a better deal from buying this home for the following reasons.
1. Seller will save on commission almost 50k
2. Seller will have no hassle of preparing and renovating property for sale.
- this home is about 12 years old and was originally build with basic features that are showing wear and tear. Probably will need at least 50 - 100k to bring it to the top sellable condition if they want to get top dollar.

Where would you start this process? I understand we will need to get an appraiser to get the property evaluated. Would you suggest for each party get an appraiser? Or should we get home evaluated before approaching landlord with this idea?
How about the agreement of purchase and sale? Would that be done by a lawyer?

Also like to get some input from landlords, if someone approached you to buy property that you plan to get rid of anyway, how would you handle the price considering savings on renovations and re commissions, time to list and sell the home?

If location is important this is in Richmond Hill Ontario

Thanks for any input :)
Sr. Member
Dec 1, 2006
944 posts
129 upvotes
Toronto
I think you can figure out the value of your home fairly easily by comparing houses in your area.

As for paperwork - just contact a lawyer to do the private sale once the seller agrees with your number.
I think the lawyers will charge roughly 2-4k to do all this work for each party.
Member
Dec 12, 2011
203 posts
224 upvotes
Toronto
If I was a selling my rental property, I wouldnt be looking to sell it to a tenant and that is just being honest. It is such a huge asset that I would need to know that I got fair market value. If you even mention to the landlord that it needs 100k of work I am certain that you will offend him and he blows you off. 100k of work is needed to update these old homes in toronto that are over 80 years old, not at 12 year old house in the suburbs. It seems like you are becoming emotionally invested in buying this house without any inkling that the landlord even wants to sell it to you. It's better you speak with him first as the mental gymnastics may be all for nothing. Accept the fact that the landlord may want to sell on the market and start researching other properties to purchase as a contingency. He is overseas so you wouldnt be doing him a favor in buying his property, it would be the other way around. He would just pay a realtor to have it cleaned, staged and sell the place. No inconvenience to him. Best of luck OP. Approach him respectfully.

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