Want to Buy Your Rental Home? What Buyers Should Know Before Approaching Their Landlord

People who are currently renting a home they really like may wonder about buying it, especially if they are dreading the moving process or having trouble finding a home they feel fits their needs. The transition from renter to homeowner is a big one, and while some landlords may have no interest in selling one of the rental homes they own, a few may be perfectly happy to entertain the idea. But before asking a landlord about purchasing the home in which they are currently renting, tenants should consider making some preparations first to make sure the home really is the best possible fit for them and to ensure that they will be negotiating to purchase it from a position of strength. 

Research Current Market Value

Tenants who are seriously interested in purchasing the home they are renting should start by making sure that the current market value of the home would translate into an affordable home purchase. A good way to do this is for tenants to search for and secure the assistance of a local real estate professional who specializes in working with buyers or tenants who are transitioning from renting to home ownership. The agent will be able to use current listings and recent comparable sales from the same neighborhood or area to pinpoint the most current fair market value of the home. The tenant can then use this information to help them determine if they can afford the home and how much to consider offering their landlord, should they decide to pursue buying the home.

Consider Changes in Monthly Costs 

In addition to the cost of the expected mortgage principle and interest payments, tenants must also consider all other costs they would be responsible for paying as the owner before making a final decision to try to purchase the home. These costs include any annual property taxes, repairs, maintenance, homeowners association fees, insurance, and utility costs. In addition, tenants should ask the buyer's agent to view the home with them to look for any potential issues that might affect the actual value of the home.

Seek Mortgage Pre-Approval

Once tenants have a good understanding of the market value of the home and the costs they would incur in owning it, it is time to make sure that they are financially capable of buying the home. Meeting with a reputable lender to discuss loan options and getting pre-approval for a mortgage in the amount of the home's most likely market value is a good way to determine financial capability. It is important to understand that full loan approval will not be given until such time as a full market appraisal and underwriting process after an agreement is reached.

Approach the Landlord

Once tenants have determined the probable market value of the home, along with any other costs of they would incur as owners and have confirmed their financial ability to purchase the home, they are ready to begin discussing the possibility with the landlord. 

A good plan for doing this includes scheduling a formal meeting attended by the tenants, the landlord, and the tenant's real estate professional to formally ask the landlord to consider selling the home. Tenants should make sure to offer the landlord a copy of the comparative market analysis, along with a copy of their loan pre-approval letter to assure them that they are serious about purchasing the home. Tenants should expect that the landlord will want some time to review the information and discuss it with their real estate professional before giving a decision.

By working proactively with a qualified real estate professional to determine value before speaking with their landlord, tenants are protecting their interests, while making sure that any offer they make will be considered seriously by their landlord. In the event that their landlord is unwilling to sell the home, the tenants will be able to use the preparations they have made to purchase another home, instead.