Tag Archives: for sale by owner

Do sellers ever agree to rent-to-own deals? Yes, a few—when there’s a downturn

It’s a route to ownership that may make sense if you’re a renter who wants to buy but you’re concerned about job stability and need a way out if necessary.iStock

It’s fair to say that most New York City renters have the same real estate fantasy: Instead of throwing away their money every month—and agonizing over it—they could be applying their payments toward ownership.

That’s why rent-to-own luxury condo programs, which are rare but growing in the pandemic, have so much appeal. They help developers who are struggling to fill empty apartments and give renters who want to buy a chance to wait and test out the building—like a glide path to ownership. You can find rent-to-own condos at 100 Barclay StreetOne Manhattan Square, 196 Orchard, 298 East Second Street (Houston House) and 21-30 44th Dr. in Long Island City (Corte).

Luxury condo are nice of course, if you can afford them, but for most buyers a condo that starts at, for example, $4,485,000 at 100 Barclay or $1,395,000 at 196 Orchard is out of reach. So you might be wondering: Is it possible to approach someone selling an apartment or a house and ask if the owner will allow you to rent first and buy later—and apply your rent payments to the purchase price?

Market decline brings back rent to own

The answer is yes. Rent-to-own purchases of apartments or houses from a seller (not a condo developer) come back in fashion when sales are slow, like they are now. But it is not typically a widespread phenomenon.

“In the last downturn there was buzz about rent-to-own and very few deals happened—it was talk, talk, talk, and at the end of the day, very few happened,” says Mark Chin, CEO of real estate brokerage KWNYC.

These deals don’t end up converting many sellers, however, with more programs available from condo developers, rent-to-own may gain some more traction. And as sellers are forced to compete with developers of new condos, taking a page out of their playbook is one way to level the field.

Why would you rent to own?

It’s a route to ownership that may make sense if you’re a renter who wants to buy but you’re concerned about your job stability in this economy, for example, and want the ability to cancel the deal without penalty. Like rent-to-own condo programs, rent-to-own deals for resales give you a period of time to decide whether to buy.

So, if you are renting for one year, you may have to let the owner know by the eighth month if you intend to buy. Depending on the agreement, you can apply a portion or the full amount of your rent toward the purchase price. The deal allows you to chip away at the price of the house while giving sellers the rental payments they can use to pay their mortgage or common charges.

A rare kind of real estate deal

They’re not a straightforward path to ownership though. In fact they remind Jonathan Miller, president and CEO of appraisal firm Miller Samuel, of a reverse mortgage, another rarity for NYC. And, if you think about it, they are also somewhat mind bending when you consider what happens when a tenant ultimately decides to buy, and has their rent deducted from the sales price. “You could argue that they paid no rent,” Miller says.

It’s not necessarily a way to get a deal either. Usually, the seller is asking for a price they couldn’t get on the open market, Miller says.

To Miller, they make up a nominal, niche part of the market.

Where to find a rent-to-own property?

Rent to own can be negotiated with any type of building—townhouse, condo, or co-op, says Steve Wagner, partner at the Manhattan law firm Wagner, Berkow & Brandt, who represents co-op and condo owners (and is a Brick sponsor, FYI).

“I’ve done a couple of them,” he says, emphasizing that the deals were not new construction but apartments that were converted long ago and were rented to someone who is interested in buying.

“With a condo or co-op, it is likely you’d be approved to buy but not guaranteed. Generally with condos, the board has a right of first refusal and co-ops have the right to consent. This is handled in the contract, as well as financing, approval, representations, all the stuff you’d normally have in an agreement,” Wagner says.

To Craig L. Price, a partner at the law firm of Belkin, Burden, Goldman, this mode of buying “has become more than niche” recently. He’s seeing an uptick now because of the pandemic and in the last month worked on four such agreements (one didn’t pan out because of the complexity of the deal and became a regular rental).

These arrangements are easier to do in a condo than in a co-op, he says, which will require jumping through many hoops to gain approval from the board.

Price recommends pre-negotiating a purchase agreement before you occupy the apartment or house—you’ll have more leverage with an owner of an empty place. An attorney will need to work out protections for you to prevent the owner from selling to someone else before you exercise your option, he says.

“The downside for tenant is that they may overpay,” Price says. You are negotiating a price without knowing where the market will be in eight months or a year from now when it is time to pay up. You may be locking in a premium price for the property, he explains.

He recommends tenant buyers get a financing contingency as part of the deal (aka a mortgage contingency), which offers you a way out if you can’t get a mortgage.

Source: Brick Underground – JULY 27, 2020 – 9:30 AM


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The Cost of Selling Your Home Without a Real Estate Agent

Everybody likes to save a little money. So when Rossana was ready to sell her condo a few years ago, she figured she could save some cash by selling it herself — without using a real estate agent. After all, her property was in a hot real estate market and she thought: “How hard could this be?”

Rossana, a busy mother of one, had become overwhelmed juggling her daily responsibilities in addition to managing her rental condo. She had grown tired of being a landlord and dealing with a revolving door of tenants — so when the family currently renting it was moving out, she decided that it was time to sell.

In hopes of saving some money, Rossana chose to sell her condo herself instead of working with a real estate agent. She thought: How hard could it be? She figured it would be easy to just hire a company that charges a flat fee to photograph the condo for her and advertising the property online. After all, she could handle the rest of the details herself. Right?

What she quickly discovered was that this approach didn’t work.

Missed Opportunities

“I found the service I used was not the best,” Rossana says. First, she says the service might have turned off potential buyers with unprofessional photos, “Honestly, I could have done a better job if I had done it myself.”

Second, when it came to marketing her property, Rossana says the marketing plan wasn’t aggressive enough to expose her condo listing to a large population of potential buyers. “My condo just didn’t get the same visibility if it would have had on MLS.”

Her condo was not widely promoted, and the service she used was not authorized to advertise on Realtor.ca (also known as MLS), which is many Canadians’ first stop when starting their home search.

Low Buyer Confidence

Rossana found buyers who had real estate agents wouldn’t come to view her property since she was selling it herself. “I think they lacked confidence that the sale would go through, or that it would be a complicated process because I didn’t have an agent.”

While she wasn’t getting a great deal of interest, Rossana still had to be on-site for open houses over the weekends. “I was living at the other end of the city at the time, so the commute was terrible. It was so much work, but I wasn’t getting much traction.”

Less-than Attractive Offers

When offers did get presented, they were far below the listing price. Plus, agents came in very confident with their clients’ offers, and Rossana didn’t feel she had the experience to handle these types of negotiations.

“I felt people were trying to take advantage of me, because I was trying to sell on my own. And I didn’t have the full picture of the market. I didn’t have the background to stand up to those low offers.”

Making the Decision to Hire an Agent

After more than five weeks of trying to sell the property on her own, Rossana decided to list her home with a professional real estate agent, after getting a referral from a friend.

“I immediately saw the difference in having a real estate professional in my corner,” Rossana recalls. “She offered staging, took really nice photos, and her level of professionalism was so impressive. And when there was an offer coming in, she was able to negotiate on my behalf.”

In the end, Rossana sold her condo — about two weeks after hiring an agent — and for a price she was very happy with.

“I really underestimated the amount of time an effort needed to sell a home myself. For anyone looking to sell their home, I highly recommend working with a real estate professional.”

Reasons to Use a Real Estate Professional

Rossana’s experience is a valuable tale for those thinking of taking a DIY approach to selling a home. While there is a cost to selling with a real state agent in the form of commission, the cost to sell without one may be greater.

Here are five benefits to working with a real estate agent:

  1. Market Knowledge. Rossana’s real estate agent knew what comparable condos in her neighbourhood had sold for, and the inventory on the market at the time. This enabled her to have an informed perspective on a reasonable listing price and acceptable end selling price.
  2. Visibility and Presentation. From professional staging to high quality photos, Rossana’s real estate agent presented her home in a highly attractive manner that was appealing to potential buyers. And because she could list the property on Realtor.ca, those looking for properties online could browse the photos and features of Rossana’s condo 24/7.
  3. Administration and Coordination. One of the things that Rossana underestimated was the time commitment required to sell a home privately. Her real estate agent took care of all the showings and open houses, allowing Rossana to be completely hands off until it came time to review an offer.
  4. Professional Real Estate Networks. As an established agent, Rossana’s real estate agent could connect with others working with buyers in the neighbourhood, and present the property to those in her network, further widening the net of potential purchasers.
  5. Negotiation Skills. Rossana’s real estate agent had significant experience negotiating deals and was in a great position to get Rossana the best possible price for her condo — Rossana didn’t have to do any of the negotiating herself.

Thinking about selling your home? Let Rossana’s story be a reminder of the benefits to working with a real estate professional.

Not sure how to find one or what to look for in a real estate professional? Discover Seven Things to Look for in a Real Estate Professional for some valuable tips.

Source: RoyalBank.com – By Diane Amato February 19, 2019
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