Selling house to current renter (RE agent, tenants, disclosure, appraisal)

[Reggie Fitz]

I was hoping somebody here could give me a little direction on how to go about selling my house to the person currently renting it. This seems like such a basic question, but all the websites I've read online so far give me different tidbits of information here and there, but I'm looking for a little bit more clear step by step process on how this will go down.

For a little backstory, here is my post from last year about my adventures in trying to sell this house. After all that shenanigans, I ended up renting out my house to a lady who's been great, takes care of the place, pays rent on time every month, and there haven't been any major issues up to this point, so I'm really thankful for that. The lease is set to expire at the end of August, and the last time we talked, she expressed interest in purchasing the home. Great! I can finally get this place off my back, and I don't have to pay realtor fees to boot. The downside of the 'no realtor fee' is that we don't have anybody to guide us through this process and neither of us are very experienced in the world of realty, but I'm confident I can figure this out between all the different resources out there.

I'm guessing a lot of you are going to tell me to just hire a RE attorney, and that's fine. I'd just like a little better idea of what the process will be going into this, and also when a Title Company needs to get involved. Does anybody have a good site or resource they could share? BTW I am in SW Michigan. So let's say the buyer and I have agreed upon on price, I guess I'd have a purchase agreement drafted by my RE attorney, execute, buyer submits to her financial institution for review(and title company with earnest money deposit?), then inspections, appraisal, underwriting. If that's all acceptable, we close at title company. At what point does the Title Company become involved, is that when the purchase agreement is signed or a little later? I know they provide title insurance, searches, closing etc. Is there currently any precedent for who chooses the title company, and who pays closing costs (Maybe whoever chooses is who pays?) Any advice on choosing a title company? One last question, is there anything else I need to take into consideration with regards to selling the house to someone who is currently occupying it?

I'd like to make this transaction proceed as smoothly as possible, and also advise the buyer in any way necessary (perhaps she should have her own RE attorney as well). Any advice or guidance on the questions I raised here would be greatly appreciated, thank you!

[Moonlady]

Sorry I don't have all the answers because I'm in the same boat and will be selling our house to our tenants in January if all goes well. So, I'm interested in any answers you may get.

However, my husband's family sold a piece of property last year where the buyer used their RE attorney and title company. They drew up the contract, had the family members sign and the closing went relatively smoothly. Id say start with finding a good RE attorney and ask them what to expect and go from there.

[davebarnes]

You need to agree on a price.
If you cannot, then you should get an appraisal.

Find a good RE lawyer and get them to hold your hand.

[NilaJones]

I did this, once. I payed my RE agent a flat fee to handle the transaction ($500, IIRC).

Has your buyer already qualified for a loan? Or are you thinking to finance it yourself? That's a whole 'nother can of beans.

[thatswanlady]

We actually just bought our house from our landlord last April.

First, you'll need to agree on a price. Our landlord had a price in mind based on his attempt to sell the house years earlier, so we started there and came to an agreement that worked for everyone.

Once a price is agreed on, get a purchase agreement in place -- we found a pretty standard one online and used that.

After that point, my husband and I secured financing and the purchase proceeded as usual. We got an inspection and negotiated with him about what he'd fix and what he wouldn't. We were reasonable in our requests and he was reasonable in his reply. The house was appraised, all was well, and we closed.

Make sure you understand what forms you're liable for in your state -- disclosure forms and anything else.

The purchase worked well for us -- we had rented from him for almost two years, and we were on friendly (yet professional) terms. I would say the biggest potential minefields in going without an agent would be in price negotiation and the home inspection. We were lucky overall, but I think those were the two points that I wished we had a go-between -- nothing got heated, but I could see a situation where it might.

We chose the title company -- I believe the buyer always does. We negotiated closing costs along with the price -- he paid about 85% of our closing costs.

Feel free to message me privately with any questions.