I am a first-time buyer and am looking to purchase the home I’ve rented for six years.
My landlord is selling the house to me for $30,000 under the listing price, because I think he just wants to unload and move on. The house also needs work, like a new refrigerator, garbage disposal, and a new toilet, but nothing major that would hinder me from living in the house. He has given me a year, which is up in February.
I am questioning the purchase for a few reasons: One, the Fed has hiked mortgage rates up. Plus, I haven’t saved the $12,000 for a down payment. I’ve also heard that there may be some programs that can help me with closing costs and taxes. And the additional work on the house will cost me more.
I’ve been taking advice from everyone, but I’m still unsure. Should I talk to a realtor?
‘The Big Move’ is a MarketWatch column looking at the ins and outs of real estate, from navigating the search for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.
Dear First-time buyer,
I know it’s scary to buy this house without anyone helping you, or holding your hand. For that reason, yes — go for it, and consult a realtor. But here’s the catch: Your landlord will have to pay for their commission. So are they on board?
Taking a step back here. I am so glad you’re in a capacity to buy a home and build wealth versus renting.
But I want you to be sure that your landlord isn’t ripping you off. Is he lowering the price by $30,000 because of your good relationship? Or is he (or she) overpricing the house on the market — and trying to offload a property that isn’t in great shape structurally and leaving you with the hard work of repairing it?
Get an inspection done. It’s always best if you get a third party to look at things thoroughly and get a sense of the value and the shape of your home before you buy it. The inspector will also find out if there are any structural issues like cracks in supporting walls, dry rot, and/or problems relating to the foundation.
“‘An inspector will find out if there are any structural issues like cracks in supporting walls, dry rot, or problems relating to the foundation.’”
Technically, getting a realtor to help you is free. And if you go through this entire process with a realtor, yes, they’ll hook you up with mortgage brokers, negotiate for you, and provide emotional support and advice. They can also help you look over documents and deal with the nitty gritty.
“If you bring a realtor to the table and [your landlord] is still willing to sell this house for you for $30,000 under the list price and he’s willing to pay a realtor, then get a realtor,” Kenny Simpson, a real-estate expert and investor who leads The Simpson Team, told MarketWatch.
But if he’s not keen to get a realtor involved, then he may not give you that $30,000 discount, he added.
There are many things you can do independently. From getting pre-approved for a mortgage to getting inspections done, and so on, are all tasks that you can arrange. If you want to get a good mortgage rate, call 10 lenders, go online, and find the best deal. Don’t settle for the first offer. Keep digging, keep trying to negotiate it down.
It’s hard being a first-time buyer. Simpson noted that it’s hard to know if $30,000 under is even a good deal being a first-time buyer, and you’re unable to check (yet) with a realtor. “You don’t want to make a bad move,” he said.
“‘If you want to get a good mortgage rate, call 10 lenders, go online, and find the best deal. Don’t settle for the first offer.’”
To that end, “If you are very scared, then yes, [hire a realtor] because it will be the biggest purchase of your life and you make a bad decision. If you have a realtor, you might get a better price,” Simpson said.
Right now, it’s slowly tipping into a buyer’s market in some parts of the country, as sellers are forced to make concessions to bring buyers to the table. Sometimes, it’s knocking $30,000 off the list price, other times it’s covering closing costs, or helping the buyer to lower their mortgage rate.
If your landlord is against you using a realtor for the selling process, research the price and dynamics of your area. Is your neighborhood still a hot market? Are homes still selling fast?
The bottom line. If your landlord isn’t going to be majorly opposed at having to pay a commission likely to pull your $30,000 discount, hire a realtor — if even to get a valuation of the property — and gain some confidence to brush up on your own property-market skills so you can make a better financial decision.
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