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Please help me draft a letter
Selling house to tenant


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17 replies to this topic

#1 PureBliss

Posted 26 December 2012 - 06:53 PM

Hi there, hoping for some help.

We are looking to sell our investment property and have had it valued by 2 agents.

Our tenant has advised both agents that he would be prepared to buy it and named a figure.

His figure is about $30k under what we would be expecting, even taking into account the fact that we could sell it directly to him, without agents fees.

So, we have decided as a first step, we would like to write him a letter, outlining our "minimum",  and give him an opportunity to raise his offer. We would sell to him privately and use a conveyancer to handle all of the logistics.

If he doesn't raise his offer we will put it on the market (with an agent) and see how we go.

Has anyone sold a property privately before? Any real estate gurus out there? What would be critical to include in the letter? Is there anything else I should be aware of?

Thanks in advance

#2 MrsSmith247

Posted 26 December 2012 - 07:03 PM

Have you had any prior contact with the tennant?  I would think that would play a part in how formal the letter needs to be.

I would make it brief and include your number for him to call to further discuss.

Dear Tennant
As you are aware, we have had the property you are residing in appraised with the intention to sell.  We have had feedback that you may be interested in the property and we would like to offer you the opportunity to purchase prior to putting it to the market. Please feel free to contact me on 0412 2345 6789 if you would like to discuss this further.

My sister purchased privately.  It was very straightforward as there was one less person in the loop.  My sister dealt with her conveyancer, the vendor dealt with theirs, and it all went off without a hitch.

Good luck!

#3 Feral-as-Meggs

Posted 26 December 2012 - 07:14 PM

Id put the price you want in there

I'd also put a timeframe on it so you don't get strung along and miss the ideal season to market the property (whenever that is for your property).  

You could say....

If you are interested in buying we would need to exchange contracts by ......... to give us time to put the property on the open market if necessary.

#4 TillyTake2

Posted 26 December 2012 - 08:19 PM

How realistic are you being? Keep in mind most agents will be "optimistic" about what the property is worth with the plan being to encourage you to decrease the price if it doesn't sell.

#5 BetteBoop

Posted 26 December 2012 - 08:26 PM

QUOTE (TillyTake2 @ 26/12/2012, 08:19 PM) <{POST_SNAPBACK}>
How realistic are you being? Keep in mind most agents will be "optimistic" about what the property is worth with the plan being to encourage you to decrease the price if it doesn't sell.


Agree with this. They know vendors are likely to list with whoever gives the highest estimate so they sometimes inflate valuations to secure a commission.

Look at sold properties in the same area and get a idea of what it's really worth. Keep in mind how much you're saving on real estate commissions and that even if you listed it, people would offer below what you probably expect.

It's always going to come down to negotiating a price. The purchaser has put in his offer, generally what happens next is you make a counter offer and be prepared to meet in the middle. Or, as PP said, give your non-negotiable price and give them a take it or leave it offer.

#6 JRA

Posted 26 December 2012 - 09:04 PM

QUOTE
His figure is about $30k under what we would be expecting, even taking into account the fact that we could sell it directly to him, without agents fees.


Check the agreement with your agent who manages the rental. They may have rights to the sale

#7 Pearson

Posted 26 December 2012 - 09:56 PM

per JRA - check with the agent who manages the property

research what properties have sold for in the area - and is your property of the same standard as these properties?

maybe this is a starting point for him.

I also, once you have checked with PM, write the letter MrsSmith suggests.

#8 Illiterati

Posted 26 December 2012 - 09:57 PM

You have a buyer. In a falling and vey uncertain market. I'd probably meet them half way on the offer and be done with it.  Especially if the house's value is on the higher side.

What if you went to auction and the house was passed in at your current price? What would you do? Take it off the market completely or would you be willing to sell at slightly below?  You might end up selling at their tenants current offer and then have to fork out for agent commission and advertising fees as well.





#9 greengoddess

Posted 27 December 2012 - 02:42 AM

I have both bought as a tenant and sold to a tenant.

I was renting a property when it came up for sale, and ended up buying it (it was my first property) - we dealt with an agent rather than the landlord. It was as per any purchase, really.

I also sold a property to a tenant. They had phoned me to say that they were interested. Their first price was about $60K less than I wanted. I told them the price I wanted to clear (which was reasonable in the context) and they said yes automatically.... mind you, they were older and the wife had just been diagnosed with something (not sure what) and I think they just wanted to stay put rather than go through the moving process again (they'd been tenants about 8 months or so). We did the deal on Christmas Day (a few years back) and had a quick settlement (using the same lawyer as it turned out! - don't worry, we both had to sign disclaimers).

I'd probably make any approach to them reasonably informal at this point. Depending on what you're expecting for the property, the fees might be $10K, $15K or more, so take that off your initial figure and you're getting close to half way to theirs. Then think about the cost of having it on the market - marketing costs upwards of $1000, more if you go to auction; each month it is on the market you will have rates (body corp if it's an apartment), mortgage interest.... so for three months on the market, you might have about $5-10K costs (depending on the property), which, when added to the agent's fee, means you're getting close to the figure your tenants suggested.

I guess what I am trying to say is look at what it will cost you to put the place on the market and take that off your initial price and then use that as a more realistic figure to begin bargaining with your tenants. Don't focus on the price you want to achieve, as that is not the money you will receive in hand, as such. It will be a lot easier to have a quick sale with the tenants, than to rely on disappointed tenants to keep the place in good order for inspections!

Good luck
GGxx




#10 red_squirrel

Posted 27 December 2012 - 12:45 PM

Have you had a bank value it?
The banks will only lend a certain amount of that value to the tenants.
Bank evaluations tend to be lower than real estate agents who want your business.
What I am trying to say is, as much as they want the property, the bank may not see the house as worth that much and subsequently not lend as much.

#11 PureBliss

Posted 28 December 2012 - 03:39 PM

Many thanks for your replies, they have given us confidence to give this a go privately! Here is the initial draft - any feedback welcome!!


Dear xxxx,

As you are aware, we have had the unit you are residing in appraised with the intention to sell. We have had feedback that you may be interested in the property. We apologise for taking several weeks to respond to your interest, sadly we had a death in the family just prior to Christmas.

We would like to offer you the opportunity to purchase the unit privately, prior to putting it to the market. We have considered your initial offer, the market value of the property, and the advantages that come with a quick, private sale. We wish to advise you that our preferred selling price is in the vicinity of $460,000.

Should you wish to amend your initial offer (which we understood to be $420,000) we can be contacted directly on xxxx or xxxxx).  We intend to use xxxx Conveyancing  Services to complete all necessary contracts.

We would like to exchange contracts by Fri 18th January 2013.  If we have not arranged a private selling agreement by then, we will put the unit on the market with a local agent.

Thank you for being a great tenant, and keeping the unit in good order during your time there.  We hope that we can come to an arrangement shortly that we are all happy with – and you can enjoy the unit on the beach this summer!
Kind regards


#12 skylark

Posted 28 December 2012 - 03:54 PM

What area are you in? Units here are regularly selling around 65k below the initial asking price (a drop of around 20%), so your agent valuations may be overly optimistic. Obviously depends on the area you are in and how the market is travelling there.

#13 PureBliss

Posted 28 December 2012 - 04:15 PM

Hi there, it is a beachside unit in SE Melbourne. Its an unusual one, because there isn't alot like it left in the area. Most unit blocks have been redeveloped and are now commanding $800k.

Its 3brm, metres from the beach, shops and station. Recently renovated.

The agents both said that conservatively we would get around $460k, maybe up to $480k in current market. Two years ago it would have got more like $500k. Sigh!

If the tenant offered $440-450k we would sell it for sure.

#14 Jellyblush

Posted 28 December 2012 - 08:23 PM

It sounds amazing, I'll buy it!

#15 ekbaby

Posted 28 December 2012 - 08:36 PM

I think your letter has a bit too many personal details in it, they don't need to know about what's been happening in your family, for example. I would probably drop the first and last paragraphs.

Are you able to speak to them by phone?

#16 humphreybear

Posted 29 December 2012 - 08:09 AM

I agree with ekbaby, it is too long and too personal (and after all whether they buy it or not, they are there this summer).

I think a phone call would be better.

#17 Shellby

Posted 29 December 2012 - 10:21 AM

I would just call them. We brought our current house through private sale - we just talked on the phone, I said I wanted this price, they said ummm we want this one, I came back with a little higher and why, they came back a little lower and why, then after 5 minutes we agreed on a price and it was done. No letters, no waiting - just yep I'm happy to pay that, your happy to get that - I will go and sign the papers tomorrow.

I also agree with looking into a non RE valuation. I know here most houses have been selling for $20,000+ less than what the RE have said or listed it at. Also banks don't go on RE valuation and you may find you miss out on a whole market as they can't borrow that much for that property from the bank as the bank values it lower than what you want, so the bank will only lend to a certain amount.


#18 Illiterati

Posted 29 December 2012 - 04:01 PM

Who has been relaying the information between you and the tenant? The letter sounds like it is a third party? Did they express their interest to buy and the offer price to the leasing agent and who then passed it to you?

Why don't you just negotiate over the phone? The only paperwork that matters is the contract and that is the only written thing I would be giving a buyer.




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