Renter wants to buy, but at lower price

Jul Hamer · 2021-03-09T20:42:24-08:00

Need some advice BP. I have been renting a townhouse in a suburb of Baltimore for the last 7 yrs. I have been an outstanding tenant ( landlord's words). It's a nice area close to major highways and shopping centers. I have been watching the local market for a while and sales in this specific neighborhood have been very reasonable. Early this year I finally mentioned to my landlord that I would be interested in buying if we could agree on a reasonable price. An appraisal was ordered and I feel the comps used were way overestimated (like by at least $30k). This house is 40 yrs old with squeaky floors, few modern updates, cracks in walls and baseboards, etc. The comps used were updated with modern finishes. The landlord came back with a reduced as is price based on the comps, but it is still way more than I expected for the neighborhood. A much more updated house sold for that same price a few months ago. I really like the neighborhood and the house (which I have been dying to fix up for 7 yrs) but is there a tactful way to ask the owner to come down on the price? He said I could get my own appraiser but i'm not sure that will drastically change the price. Should I also order a home inspection so i have more bargaining power? I really picked an awful time to start this process ...just as housing prices are exploding. So what are my best options for negotiation without insulting my landlord? Any help is much appreciated!

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

5y

If they did an appraisal and the owner is letting you do one, then do it. If they both come back higher than you expected chances are the house worth more than you thought. Depending on the price, ask if they can come down $5K. If that is too high, then look for another place to buy. 40 years old for a house isn't brand new, but it isn't really old either.

3 Reply

Bjorn AhlbladPro Member

Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes

5y

@Jul Hamer What Teresa says above makes perfect sense. When your seller sells he/she will have considerable taxes to pay. You could give him the option of selling it to you over time-he/she becomes the bank for however long y'all agree and he pays the taxes as the income comes in. You would pay a downpayment of course. It is called seller financing. Do some googling and discuss it with the seller. Prices are very tight right now so expect that feeling like you are paying too much. But you are fortunate as well. When my tenants ask if I am willing to sell they get a flat 'no'. I buy properties to rent and don't sell.

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Ozzy SirimsiBusiness Member

Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes

5y

It seems like you voiced your concerns about the appraisal and he came down on the price anyway.

He even suggested to get your own appraisal.

1- You can call the appraisal and talk to him about it, and send it to an agent and get their opinion.

2- Make a list of all the repairs that you need to do, put a price on it and go to your landlord and explain why it price needs to be lowered.

However, prices are high right now, you might be disappointed. You might thing it worth less, but it might turn out appraisal is wright and you are wrong.

Hard for me to know exactly without knowing the address and condition, if you want send a pm, I can take a look at.

Either way, if long term investment,you like the neighborhood, it might be okay still complete the deal.

Good Luck

2 Reply

Jim S.

Sterman, MI · Member since 2017 · 378 posts · 306 votes

5y

Sometimes the appraiser goes mainly by # of bedrooms and square feet. A fixed up one might not appraise much higher than it did before it was fixed up.

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Stephen Kehoe

Property Manager · MD · Member since 2015 · 186 posts · 125 votes

5y

This just happened with one of my renters. The zestimate price did not reflect the recent run up in prices and he was surprised by an additional 30k. After getting a market analysis from a realtor and realizing how tough it is to be a buyer right now he agreed to the surprisingly large sale price. Sorry but this is the result of low interest rates and inventory.

1 Reply

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

5y

The appraiser determines market value. They take into consideration the age of the home, the layout, condition, amenities, etc. So if they say it's worth $235,000 then there's a really good chance it's going to sell for $235,000.

If you disagree with their valuation, you can order a different appraisal or you can buy a different property. A home is only worth what YOU will pay for it, so maybe his valuation doesn't make sense and you'd rather look for something different. I think you should shop around a little and see what you find. You may be surprised to find that your current home is a good value, particularly after the Landlord offered to drop the price.

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John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

5y

Get a contractor to give you a price to make the house similar to the comps. Then use that as evidence of actual value of the property.

1 Reply

Erik W.

Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes

5y

If you feel the property is overpriced, then go buy something else that you think is fairly priced. Simple. People don't go up to the counter at the department store and argue that the $100 pair of designer jeans should only cost $50. At least...I hope they don't.

Inventory is tight right now in all desirable markets. It is common for a Seller to list a property and have multiple offers over list price within a few days. Land lords are in the business to make a profit, unlike regular Sellers who just want to dump their current residence and move to a new residence. He has all the time in the world to wait and may see further appreciation of prices coming down the road. The Govt is giving money out now like candy and interest rates are crazy low, so there's no reason for the land lord to sell for less than market value right now when the price may go up another 10% in 2-3 months.

It's a Seller's market.

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Mason Hickman

Real Estate Agent · Sandwich, MA · Member since 2014 · 974 posts · 636 votes

5y

@Jul Hamer

Was the landlord looking to sell or did you approach them? They seem to be handling things reasonably fair based on the current state of the market. One other item to highlight by selling to you is the lower closing costs since they won’t have to pay agents.

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Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

5y

what you can do is justify your offer with the same configuration house that has similar PSF like the one that you described.

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Justin Hoggatt

Investor · Morrison, CO · Member since 2015 · 221 posts · 177 votes

5y

I think we all have a similar response here. Basically the appraiser isn't on the sellers side, it's his license on the line and he will look at comparables. Sometimes a home will suffer by the others around it (like updates done or not done) and you've likely heard that you shouldn't buy the most expensive home in the neighborhood because the value of is dragged down by the other lower priced homes around it. The same is true with a home on the lower end of the spectrum. I do know that inventory is low, prices are high, and buyers are struggling to find good options. You may be in a great situation in that you aren't competing with other buyers if you're able to get the deal off market. Also, remember, he doesn't have to sell to you and he seems to be taking the fair approach and going with an appraisal and not just spouting off a number.

If you feel it's worth less, come up with a compelling argument and negotiate. Find out his motivations. Why would he want to sell? What does he gain out of it? Would he eliminate the land lording headache? Would he be able to take those proceeds and do something great with it? - retire, get a bigger property, send a kid to college? If you tug on emotions, that can help you situation, otherwise you may want to consider taking what you can get and see how the value for you may be more than just the price. After all, you are paying rent and not gaining equity out of it.

1 Reply

Johnny D.

Rental Property Investor · Columbus, GA · Member since 2021 · 22 posts · 10 votes

5y

To answer your original question, a tactful way to ask the owner to come down on the price would be to simply let them know you are interested in purchasing it, but unfortunately the price is a bit higher than you would be willing to pay due to...(you can then tell your reasons - house is 40 yrs old with squeaky floors, few modern updates, cracks in walls and baseboards, etc and a much more updated house sold for that same price a few months ago). As long as you are polite about how you say this, there shouldn't be a risk of insulting the landlord.

I'd recommend keeping in mind the landlord doesn't have as much of an incentive to sell as they already have an outstanding tenant in place in addition to the craziest of the current seller's market, so they will probably factor that in their decision on whether to drop the price more or not, and I have a feeling they are also pricing in their decision that your demand for the property is a bit higher then the general public's demand for the property which could seriously put you at a disadvantage in negotiating with this specific property. Personally, when I'm searching for a house, I try as hard as possible not to focus on one property, as the odds of the one specific property you're interested being a good deal is quite low, but when you focus on a bigger range of properties you're interested in, the odds of at least one of them being a good deal becomes much higher.

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Renter wants to buy, but at lower price

Renter wants to buy, but at lower price

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