Advice: Buying A Rental as my Primary Residence (short sale, real estate)

[drdexter33]

I had a short sale four years ago and have been renting a house for the past four years that I'm considering buying from the owner.
There has been no maintenance done except for the replacement an HVAC two years ago.
The owner lives 4-5 hours away and wants to sell the home.
The home was built in 1996.
Comps in the neighborhood are in the $170-175 range

The home has not been owner occupied in four years and the fact that minimal maintenance has been done, there are some issues:
• The home needs Interior and exterior paint
• Most of the windows need replaced due to frame rot
• There is some roof leakage, since the home was built in 1996 it may need a new roof.
• There is some Interior window sill repair needed

Estimated Costs of repairs/maintenance:
Interior and Exterior Paint $4000-$6000
Window Repair Replacement Cost $3000-$5000
Roof Replacement Cost $6000 - $8000
Total $17,600 (Estimated)

These issues would seem to indicate that an offer in the neighborhood of $155-160k to seem fair, however after looking at the purchase price of the home in 2009 of $194,500 at 100% financing, it would seem unlikely that the owner would accept an offer as low as this since he would need to write a check for a substantial amount of money at closing.

This also doesn't include any negative findings resulting from a home inspection which is likely to occur or the real estate broker commission, which I would likely need to get.

At the risk of upsetting the homeowner since I need to remain a tenant until I can find suitable housing I'm carefully considering whether or not to even pursue this with the owner since buying this property at a mutually agreeable price is unlikely, nor is it likely that he'll agree to pay for them.

Any advice?

[goldenage1]

Originally Posted by drdexter33

At the risk of upsetting the homeowner since I need to remain a tenant until I can find suitable housing I'm carefully considering whether or not to even pursue this with the owner since buying this property at a mutually agreeable price is unlikely, nor is it likely that he'll agree to pay for them.

Any advice?

Is there anything special about the location that would make the purchase desirable? EG, is it close to the beaches? Is someone else going to fall in love with the location?

Otherwise, you have outlined many reasons why you should not buy this house.

[ditchoc]

I wouldn't worry too much about upsetting the owner assuming you are taking care of the place and have been paying rent on time. Having dealt with renters in the past myself, a good renter is not some one you want to loose.

You mention you had a short sale a few years ago. Everyone knows the housing market has made an major adjustment. You were willing to short sell, the owner may very well be willing to as well.

You say comps are 170-175, that is today's fair market price, regardless of what he paid for it. The owner will either be willing to take the hit, or not. Regardless, I would not under any circumstance pay more than its worth. The market is improving right now but there are still a lot of choices for buyers out there. If this home does not work out, there are others I am sure.

As far as the repairs, paint is low priority. Roof is high. I would do due diligence on mold, mildew, termites. My way of looking at it would be that repairs are a compromise and split the cost. Half would be $8,800. Fair value minus half of the repairs would be 161-166k. When you have the house inspected, and you should, make sure all these things are bought to the owners attention.

So I would say your offer of about 160 is dead on. If the owner doesn't take it, smile, tell them if they change their mind to let you know. In the mean time, continue to be a good tenant, and keep looking around. You are sure to find something else.

[Lucky Dawg]

My advice is to post your question here:

https://www.city-data.com/forum/real-estate/

[yealink141]

Have you talked to a real estate broker?

[drdexter33]

Yes.

We are discussing this issue now.

Thanks for your reply!