Can I buy the house I’m renting without an agent?

#620 in a series of true experiences in real estate
May 2011, Hills Newspapers

“What if I want to buy the house I’m renting but the seller doesn’t want to use an agent?”

That question came to us in a phone call from a woman named Judy. She and her husband have been renting a house for 6 years. In recent months they learned that the elderly landlord died leaving the house to her daughters who live out of state.

The heirs let Judy know where the rent should be sent and also said that they plan to sell the house. Anet called Judy and after a few hellos told our caller that the situation was a lot like the one Anet herself experienced when she bought her first house.

Anet was the primary renter who lived in Oakland’s Montclair neighborhood with an assortment of friends, dogs, cats and a rabbit. The owners had moved to the East Coast but because they weren’t sure if they’d be returning, they’d rented the house. After a few years, they’d decided to sell and had asked Anet if she wanted to move out, or maybe she could buy?

Anet thought this might be her big chance to own in the East Bay. She was of course already familiar with the house, knew good and bad – the roof didn’t leak, the basement had never flooded, but the kitchen and baths and carpets were all old and the quantity of hot water was limited.

She had some money saved but did not know if she had enough to buy. She would need to find out about loans and what they would cost. The owners had named their price which, based on a few open houses Anet had gone to in the neighborhood, seemed like a “good deal.”

She’d thought about buying before and had attended a couple of seminars on the subject where loan people had given presentations. Anet called an independent loan man whose card she had kept. He seemed kind of sleazy, but willing.

This all happened in the 1980s when things were much looser than they are today. There was no real estate agent involved. The seller saw no reason to pay someone to help sell to the tenant. No inspections or disclosures were made; it didn’t occur to anyone – buyer or seller – that there should be any. At the time there were no point of sale ordinances, nor would either side have known about them if there had been.

The loan man talked with Anet encouragingly. He told her she should fill out a loan application and also, to get a loan, a contract to buy would be required. Anet said there wasn’t one. How would she get one? The loan man opened his desk drawer, pulled out a blank contract, wrote on it, and told Anet to get the sellers’ signatures.

The contract was overnighted to and from the sellers and the loan application was submitted to the lender. Things moved along. From the loan man Anet learned of a title company that she would pay to take care of title paperwork. After the loan was approved, the title company could tell Anet how much money she would need altogether to buy the house.

It was more than a year afterward that Anet read in the newspaper that the loan man had been convicted of fraud. But by then she didn’t care because she had her house.

So that was Anet’s experience 25 years ago, before she was an agent, before she knew anything about real estate. What about our caller, Judy? Can she buy the house she is renting? These days, without an agent?

Yes, probably. Difficult but not impossible. Smart? Probably not, and let us tell you why. But first things first. Do Judy and her husband want to buy this particular house? Can they afford what it will cost?

Does the price check out as “good”? If the seller will be saving a commission, what are the buyers saving?

Can the buyers get a loan? Will the house appraise for enough? Will the appraiser be familiar with houses in the area? By asking around, Judy can find a reputable loan broker and get most, if not all, of these answers. Meanwhile, they are going to want a contract with the seller.

A contract will spell out both seller and buyer obligations. Plus the lender will want to see the contract. Judy can order a standard purchase contract online or a real estate attorney can draw one up. As long as they cover the essential points, they can write one themselves. But how will they know what provisions to include in the contract?

Inspections should be done. Beyond a general physical inspection, what about a separate furnace inspection? Roof? Termite? Mold? What makes sense for this particular house? The seller is required by law to make disclosures, some of them even if it is a probate or trust sale. Who will determine when and how these disclosures are made?

Will the buyers be comfortable and effective in renegotiating price with the seller after inspections? Can they give reasons for what they are asking for? What if the seller doesn’t agree?

Can Judy research local ordinances and transfer taxes, also property taxes? What about hazard zones that the house may lie within — flood, fire, slide, earthquake, etc, – and building permit history? Rent control?

By talking to a local title company, the buyers can determine what title insurance and escrow fees will cost. Will they know what to look for on a title report? What about restrictions and easements that may be revealed?

It is all doable but it is far easier and much less likely that things will be missed when an experienced agent is involved. Judy, do you want to act as your own professional?

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