Tenants buying off our Landlord - any advice?

[mortagemoans]

We have just learnt that the Landlord wants to sell the house we have been renting off them for over 8 years. We have asked them if they would consider selling to us and they said in principle, yes. We have contacted a mortgage advisor and are now waiting for them to come back to us. They said they would contact some Estate Agents with a view to them coming round and giving a valuation on the property (or more accurately what they would put the property on the market for).

We are in Scotland so have the lovely 'Offers Over' system. We are first time buyers in our 50s and it's not a certainty that we would be able to get a mortgage but we are keeping everything cost.

Potentially it could save them a lot of hassle if we could buy it off them (and us!) But obviously there might be less in it for them financially.

Would we need to get a proper valuation report done in order to negotiate a price? Or do we just go by what the Estate Agents think they could get on the open market and work from there. If we were in a position to offer an acceptable price what costs would we need to factor in? Would we need to bother with estate agents beyond establishing the market value.

We are absolutely clueless (can you tell?!) We never thought we would be in a position to buy somewhere but my partner's father died last year and we are able to put down a small deposit for the very first time.

Any advice will be gratefully received!

Estate agents prove would be a starting point to know if it's a goer, but you'd need to be clear it's subject to survey. The survey valuation would be more professional and from an rics surveyor. The estate agent one is for their own purposes so could be skewed.
You could skip the estate agent and go straight for a paid surveyor specifically to do the valuation, and then work from there if you want to be sure.

I bought the house we lived in so have been through this to an extent

We didn't involve any estate agencies (not such a thing here anyway, most people use property solicitors who do both the marketing and legal side) but both sides will need a solicitor for the buying and selling paperwork.

Landlord will also still need a full home report doing - a mortgage valuation wasn't sufficient (bank originally said it was then backtracked)

If it's a privately arranged sale then the offers over system doesn't matter.

Are you expecting to pay full market price or to get some sort of discount from the landlord? Many mortgage companies (mine at the time was Lloyds) accept vendor gifted deposits where the vendor is your current landlord so if he's going to sell at less than valuation then you should be able to get a letter confirming the difference is a gifted deposit which will reduce your LTV.

Thanks. StatisticallyChallenged am intrigued by ‘vendor gifted deposits’ and will look into further. We are not sure whether our landlord will effectively discount the price in recognition of our existing relationship and the fact we’ve paid over £75,000 to them over the 8 year tenancy.

johnd2 It’s interesting to hear that we should maybe just go straight to a private surveyors report and use their ‘value’ as a basis for negotiation? Who would pay for that report and what would it cost? The Estate Agents are just going to go on what they think they could ‘get’ for the house in an ‘offers over’ situation or a fixed price situation and that could vary. We have a good relationship with our landlord and there is no letting agency involved so we are hoping we can be fair with one another.

See a solicitor. Take their advice.

The landlord isn’t going to consider giving you a discount because of what you have paid in the past. Any discount would be because by selling to you the landlord saves costs in future, such as the cost of the property being vacant whilst the landlord pays insurance and mortgage before the sale to another buyer..

Understood OneEpisode. Yes we are already talking to a Mortgage advisor, a solicitor will be our next port of call once we hear back from Landlord with their Estate Agents' valuations. It might be that the price will be nowhere near what we can afford, even with a discount. In that case it will be back to the drawing board.

You can check the sale prices of similar properties on Zoopla. I rent out a house but if I sold to the tenants, it would be at a reasonable price but not a price discounted especially for them. Therefore a proper evaluation of the property is best because if it’s valued at £200,000 by the EA, but locally the type of property sells for £180,000, your mortgage will be based on £180,000. Therefore you need accurate information with which to start the discussion. Don’t pay the EAs aspirational price. If it’s too much, find somewhere else to buy.

I'm a landlord and considering selling our property. If I were your landlord I would get 2 or 3 estate agents valuations, then I would work out the cost of the property being vacant for 6 months and any work needed to get the house into a condition to sell. In our experience this is required,and not just to get the best price, more to get a quick sale.

I would then make a reasonable offer to my tenant somewhere in the middle of the average of the valuations and any work/cost of empty property.

Be prepared for a valuation from a mortgage company to be a fair bit lower than what estate agents will value at ( although not always!)

Realistically unless your landlords are hugely disillusioned at what the property is worth and how much hassle a sale would be on the open market, they'd be daft not to snap your hands off, if you make them a reasonable offer. Plus, by the time you complete your notice and they complete on the same it will be winter and they definitely won't want an empty property over then.

Balls in your court I'd say.

If you're in Scotland someone should get a Home Report done and take it from there. If they were selling on the open market they would pay to get this done; I'm not sure how it works for a private sale but if you're using a Scottish mortgage broker they should be able to advise.

Looking on the Land Register Sold house prices listings, it looks like prices have taken a little bit of a dip since last Autumn. 2 very similar houses to ours on the same street have sold at £285,000 (Dec 2017) and £250,000 (Feb 2018). The house that sold for £250k had a smaller kitchen but had been rewired in 2016 and had a new central heating system in 2016.

Our house definitely needs rewiring AND the boiler and central heating system needs replacing (15 years old) We have British Gas in here constantly recharging the system and replacing bits of the boiler and telling us the boiler needs updating and the radiators are of the 'old' type.

We are keeping our fingers crossed that they come back with a starting price that is at least within out ballpark.

It sounds like you need a home report before considering how much to offer.

An estate agents valuation is a ball-park figure & wont consider the state of the boiler etc. Plus they will often talk up the price to the LL, perhaps leading them to think the property can fetch more on an open market. They are not exactly unbiased. And certainly not on your side.

A mortgage advisor will be able to get you a decision in principal fairly quickly.

Just out of interest, where is the property? In some areas the market is strong & sellers are inclined to get a higher offer at a closing date. Other areas can be the opposite.

Good luck!

The EA is working for the landlord, not the tenants. However terminating the tenancy and then selling is a faff. You know all the warts so you have a rough starting point. Other possible buyers would negotiate a reduction for the work that needs to be done after a survey.

However, you really need to consider buying elsewhere if you can get a property in better condition for the same price. If the LL is reasonable, you might be ok on price but don’t overpay because you are attached to the house. It sounds like it should be below £250,000. After rewriting and a new boiler you will need to completely redecorate. What are the bedroom and bathroom like?

Sorry - kitchen and bathroom??? How much needs to be spent on these?

Bathroom is small but was done up just over a year ago so it's great - all white fittings and tiled. Kitchen is OK - probably last done up 15/20 years ago so a bit tatty now and dated. Rubbish cooker is supplied by landlord but the dishwasher, fridge-freezers, washing machine belong to us. We love the area and our kids are settled in schools round here. We would need to move quite far out to areas that we would not want to live in to get anything under £250k. I've just had a friend round who said that we will be lucky to get it for that price as it's such a popular area so I am starting to feel that it might not happen for us. But you never know.

I know the EAs will big up the potential price. The landlord is only getting valuations from them at this stage as they would prefer cutting them out of the equation if they sell to us. Do you know whether we would pay for a home report to get a proper valuation or does the landlord do that - can they do that without an estate agent? Would it be better for us to suggest we cut straight to a valuation report once the EAs have given us their thoughts?

MoreProsecco We're in West End of Glasgow.

The LL might not be able to cut the agency out; many agencies have terms of business/contracts with LL which means they get a cut if the place is sold with tenants in. It's certainly in my business terms with the letting agency I use.

The West end of Glasgow is a competitive market, but you never know; there might be a way round things.

Usually the LL pays for a home report (much more detailed than an estate agent valuation) - perhaps you could offer to contribute to the cost if they are prepared to sell to you. But obviously not if they intend to put it on the market & allow others to offer.

MoreProsecco - when you say the LL might not be able to cut the agency out are you talking about an Estate Agent or the Letting Agency? Because we have no letting agent - our rental is direct with the Landlord so there is not 'cut' there. I am assuming that the three quotes that the Landlord is hopefully going to get from the Estate Agents will be provided free. If the Landlord feels he has got a feel for a price he will then probably come to us saying 'it's worth X'.

However, it would appear at that stage it would be worth getting a proper valuation.If no estate agents are involved who would we get to do that - should we offer to go halves on that provided the Landlord doesn't put it on the open market? Does the seller have to do a proper Home Buyers Report if they are not selling through an Estate Agent on the open market?

Our mortgage advisor is apparently keen for us to get a 'rough' idea of what the Lanlords want for the property so they can get on the case with mortgage lenders and whether we can actually get a Mortgage.

Sorry for all the questions!

The home report valuation needs to be carried out by the seller that will give the value of the property and also tell you roughly what work needs done. If it was on the open market usually it goes on the market for offers over 5k-10k under the valuation with a view to get over the valuation. You can't really progress until you know the valuation. LL selling before it goes on the open market would mean saving time and some fees but that's about it.

So we’ve had one estate agent round to view property (with landlord present). The EA was very positive about the house picking out all its good selling points. This was on Thursday and we haven’t heard anything back from the LL. They spent a good half hour talking after they left (out of earshot of course!) I asked whether any other EAs were due to visit and he said he was waiting on hearing back. Meanwhile our mortgage broker is asking us for a price we think it will go for.

I would have thought that the EAs would be falling over themselves to try and value this property and stand a chance of marketing it especially as it’s on the right end of a ‘very popular street’ with an open aspect etc... we were told nearly 2 weeks ago that they were wanting to sell but only 1 EA visit done and no others scheduled yet.

I’ve contacted LL and said I’m completely free for viewings and to get in touch but it’s going a bit too slowly.

Looking at other properties on the market and there’s not much out there that suits us unless we move back into a flat which we are loathe to do or are prepared to live in areas that are too far away or are in places like next to major football stadiums 🙁

Just wondering whether we should ask them about getting a Home Report done because they’ll have to get one done anyway won’t they?

My advice would be to talk to a solicitor ASAP with a view to making an offer subject to them providing Home Buyer Report. Once the LL has gone down the EA route they may well end up linked into contract and wedded to waiting it out for highest bid. They may also doubt you are serious or able to proceed if you shilly shally and start to see open market as least hassle option. I would counsel against haggling over things you have insider info on eg like state of boiler for same reason. (I am in Scotland and have sold to tenant and to a friend of a neighbour albeit a while ago. Bits of the West End are Hot, but looks to be above and below your price point?? so you may be OK depending on house style, school catchment, exact location)

• sorry by "them" providing HB report I mean LL.

Thanks howabout. I will contact our mortgage broker again as I think they have a solicitor they can recommend and then contact our LL to reiterate our seriousness and ask them for a Home Report. Or is the instruction to supply a Home Report better coming from our Solicitor? My understanding is that when you engage an Estate Agent they sometimes include the cost of the Home Report within their overall fees? I fear our LL will be attracted to someone taking the hassle of direct negotiations away from them ie. the Estate Agent route, with the hope that, even taking into account the EA fees, it will make them more money in the end.

However, we’ll do our best to ascertain the valuation, obtain a mortgage in principle, and then make an offer.

Thanks for your advice.

Well our Landlord has got back to us and given us the price that the EA has suggested they'll get and it's a lot higher than we thought (by about 40-50k). They are going to do a home report but they've indicated that they might not bother getting any other valuations from other EAs and might proceed with the EA who has given them this fantastic price.

We've said we would like to learn what the Home Report valuation comes out at but I suspect that they are getting the Estate Agent to do this Home Report. Does this mean they will use their own (EA) surveyor and have some influence on what the valuation comes out at or is the Home Report done by a completely independent surveyor?

Part of the reason that our Landlord wants to sell is that they are not set up to be a Landlord and haven't got the resources to manage the property. It's been a very informal arrangement.

I have asked whether they will hold off from engaging an Estate Agent and putting the property on the Open Market until we've made them a formal offer based on the Home Report. Am not sure if they will or not...