Selling a rental property

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Newbogel
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Selling a rental property

Post by Newbogel » Mon Feb 12, 2018 11:34 pm

I have a rented second home that I had been thinking of selling. The renters have now contacted me saying that they are interested in buying. The market is pretty hot at the moment. Any advice on how to sell. Should I kick the renters out and push the price up or just take a deal with the renters knowing that I will not have to do any improvements or lose any time with no one in the house and paying mortgage etc. seems like it’s a good idea to sell to the renters unless they really try to low ball me. If so do I need to hire a realtor? The house worth is about 210k

adamthesmythe
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Re: Selling a rental property

Post by adamthesmythe » Mon Feb 12, 2018 11:38 pm

Are you sure you know the current value of the property?

Do you know how to sell a house in your state?

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Pajamas
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Re: Selling a rental property

Post by Pajamas » Mon Feb 12, 2018 11:38 pm

Hard to say without an actual offer. Why not ask them to make an offer?

How did you arrive at the house's value?

denovo
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Re: Selling a rental property

Post by denovo » Mon Feb 12, 2018 11:39 pm

Factor in the commision you are saving + 1-3 months it is is empty and you are paying for taxes, mortgage and insurance while you are looking for a new buyer.

Newbogel
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Re: Selling a rental property

Post by Newbogel » Mon Feb 12, 2018 11:45 pm

Hi
I don’t know how to sell a house here in NC. I will contact the rental property company tomorrow for more details and if the renters want to make an offer. They have just sent me a market analysis at the moment. I have done some checking on Zillow where the price estimate comes up at 210k. Separately a friend has just sold his own house and sold it in a couple of days. The realtors said you can almost name your own price. Obviously that doesn’t mean I can sell for 300k.

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Pajamas
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Re: Selling a rental property

Post by Pajamas » Mon Feb 12, 2018 11:49 pm

Newbogel wrote:
Mon Feb 12, 2018 11:45 pm
I have done some checking on Zillow where the price estimate comes up at 210k.
"Zestimates" are notoriously unreliable. They are even having a contest to get ideas on how to improve them.

https://www.zillow.com/promo/zillow-prize/
Newbogel wrote:
Mon Feb 12, 2018 11:45 pm
The realtors said you can almost name your own price.
Sounds like a really hot real estate market.

Maybe pay for an appraisal. If the renters are willing to pay the appraised price, then you don't need a real estate agent to market it. Even if you could get a little more for opening it up to all buyers, you would have to pay a commission that would negate the higher price. Looks like a title company can handle everything in NC.

https://www.amitree.com/articles/152/no ... ow-process

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Wealth_Builder
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Re: Selling a rental property

Post by Wealth_Builder » Tue Feb 13, 2018 12:23 am

Here's how I would figure it:

First step, split the cost of an appraisal with the renters (say, 500. So you're probably out of pocket for 250). For this example, we will say this comes back at $210k.

Potential Market Sale Price: $210,000
Realtors Fee (typically 6%): -$12,600
2 Months Vacancy (Mortgage, Insurance, taxes, etc): -$2,000 (1k/month)
Cleaning and small fix-ups: -$1000

Break-Even Sale-By-Owner Amount: $194,400 --> If the current renter is willing to offer you this much or better, take it. If less, sell on the open market. Of course, don't disclose this number to the buyer if you'd like to maximize the purchase price.

Tips:
1. During the appraisal, make sure to go with and verify that the renters have done a good job of keeping it clean so you get a high appraisal.
2. If you've never sold a home before, maybe you'd prefer to use a realtor for help with the legal documents. In that case, you might raise your break-even amount.

renue74
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Re: Selling a rental property

Post by renue74 » Tue Feb 13, 2018 12:25 am

Check recently sold properties within your area that are comparable to your house. Zillow has that and also most county websites have recently sold info in their GIS area. (My county does)

Zillow can be even wrong on the recently sold stuff....so don't put a lot of stock in them.

Sell the property AS-IS to the renters if you can get a good price. No need to involve realtors, etc. Saves you a big chunk.

Plus, if the renters leave, you've got to clean and prep the house for selling and it will take up your time to get it ready.

A bird in hand is better than two in the bush.

Tal-
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Re: Selling a rental property

Post by Tal- » Tue Feb 13, 2018 12:59 am

First, this is a business decision. Selling it to the rents is great if it makes sense, but you don't need to take less (net) to make this happen. Keep that in mind. :)

Yes, you can sell a rental yourself, but first, verify that they are qualified to get financing. Ask them if they have been pre approved by a lender. If not, ask them to do so before you can talk about selling to them (this just says that they can get financing for the property).

Then....

1: Find a closing attorney in NC that will work with you on this.
2: Run this past your PM company. Occasionally, PM companies will have fees or clauses if you try and sell and don't use them. Just be sure you're in the clear.
3: Interestingly, I would not use an appraiser to determine price. I've had maybe twenty appraisals done, and thought the estimate was low on all but two of them. Instead, I'd ask for an independent real estate agent to provide a CMA (comparative market analysis). If you're in Charlotte and would like a name, just let me know and I can call in a favor. Either way, be transparent on this process, and partner with the tenants.
4: Come to an agreement on price. I would start by asking for market price. Everyone wins - they don't have to compete in a crazy market and don't have to move. You don't have to pay additional fees or list it. I'd go slightly lower than this if needed, but market price feels fair.
5: Once you agree on price, agree on terms and sign a contract. Will there be an inspection? How are closing fees paid? What is the closing date? How will rent be handled until closing? Etc. Write this up. Here's a contract I found online (this looks legit to me): https://www.haws.org/documents/form_2t.pdf
6: Once you and the buyer (no longer tenants) have signed the contract, pass it on to closing attorney. They will walk you through the rest of the process, and oversee the formal paperwork.

If you have a good closing attorney and get an accurate price, you're pretty well protected IMO.

Hope that helps.
Debt is to personal finance as a knife is to cooking.

Bud
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Re: Selling a rental property

Post by Bud » Tue Feb 13, 2018 5:49 am

Tal- wrote:
Tue Feb 13, 2018 12:59 am

If you have a good closing attorney and get an accurate price, you're pretty well protected IMO.
This is my experience. In the situation that you describe, there is little value that a realtor would add (which is mostly to connect buyers and sellers). It takes a bit more work on your end, but on a property that is worth $200k, the realtor fee is $14k so it is well worth the time.

All the best.

euroswiss
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Re: Selling a rental property

Post by euroswiss » Tue Feb 13, 2018 9:24 am

renue74 wrote:
Tue Feb 13, 2018 12:25 am
Check recently sold properties within your area that are comparable to your house. Zillow has that and also most county websites have recently sold info in their GIS area. (My county does)

Zillow can be even wrong on the recently sold stuff....so don't put a lot of stock in them.

Sell the property AS-IS to the renters if you can get a good price. No need to involve realtors, etc. Saves you a big chunk.

Plus, if the renters leave, you've got to clean and prep the house for selling and it will take up your time to get it ready.

A bird in hand is better than two in the bush.
Agree with this - you need to invest some time to research comparable sales in your neighborhood. An appraisal doesn’t always reflect actual value, especially in a hot market. There are plenty of tools to do the research yourself, but you can, of course, enlist the services of a realtor to do this (with the downside that they will typically expect that you list the property with them, along with the 6% commission). It sounds like you have a property manager for this rental? If so, talk to them - in most states, PM’s have to be licensed real estate agents, so they may very well be able and willing to do a little “comping” for you. Worth a try.

sliqua
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Re: Selling a rental property

Post by sliqua » Tue Feb 13, 2018 10:23 am

To the OP: the callousness of the way you ask random internet strangers if you should "kick the renters out" and "push the price up" confirms the stereotype a certain generation holds about landlords. I'm not judging you -- just want to reflect back to you your choice of language here and how it may be perceived.

turno77
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Re: Selling a rental property

Post by turno77 » Tue Feb 13, 2018 10:56 am

Another thing to be aware of: you may still owe the Management Company a commission even if you sell to the current tenant (that fee may be less than standard real estate commissions). See if your Management Agreement has a Sale of Property Fee.

Newbogel
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Re: Selling a rental property

Post by Newbogel » Tue Feb 13, 2018 12:14 pm

sliqua wrote:
Tue Feb 13, 2018 10:23 am
To the OP: the callousness of the way you ask random internet strangers if you should "kick the renters out" and "push the price up" confirms the stereotype a certain generation holds about landlords. I'm not judging you -- just want to reflect back to you your choice of language here and how it may be perceived.
It’s written quickly and a bit bluntly but it doesn’t define who I am. These renters have been living in the house for ten years. I never increased the rent once. I have always done what they asked for too.
Not sure why I am even responding to you actually. Does your response live up to the spirit of this community? Everyone else has been so helpful.

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Runaway
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Re: Selling a rental property

Post by Runaway » Tue Feb 13, 2018 12:37 pm

Newbogel wrote:
Tue Feb 13, 2018 12:14 pm
sliqua wrote:
Tue Feb 13, 2018 10:23 am
To the OP: the callousness of the way you ask random internet strangers if you should "kick the renters out" and "push the price up" confirms the stereotype a certain generation holds about landlords. I'm not judging you -- just want to reflect back to you your choice of language here and how it may be perceived.
It’s written quickly and a bit bluntly but it doesn’t define who I am. These renters have been living in the house for ten years. I never increased the rent once. I have always done what they asked for too.
Not sure why I am even responding to you actually. Does your response live up to the spirit of this community? Everyone else has been so helpful.
You should not "kick the renters out" but "assist the current leaseholders in finding an alternative living location" and instead of "push the price up" you can "determine a market supported valuation"... or you could write like we speak (which you did) and be appreciated by the rest of us. :sharebeer

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Pajamas
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Re: Selling a rental property

Post by Pajamas » Tue Feb 13, 2018 12:40 pm

sliqua wrote:
Tue Feb 13, 2018 10:23 am
To the OP: the callousness of the way you ask random internet strangers if you should "kick the renters out" and "push the price up" confirms the stereotype a certain generation holds about landlords. I'm not judging you -- just want to reflect back to you your choice of language here and how it may be perceived.

I appreciated the honesty. The world would be a much better place if people said what they meant and meant what they said.

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