Unique selling opportunity to neighbor

[u/4FansOfFreedom7]

I bought my first house 4 years ago. I am military and move about every 4 years. I’m moving soon and was planning on renting it out for a few years then selling it or potentially renting it long term. Currently, it rents for about $400-500 less than the mortgage (including property management fee). I bought it with a 0% down VA loan at the peak Covid prices so it’s lost about $25k in value and consequently I’ve only payed about $28k off the principal since then.

I had it all set up to rent out and my neighbor approached me about purchasing it for their elderly father. It would be an all cash offer with no realtors. The idea is intriguing to me since I really do not want to be a landlord and could get out of this somewhat poor financial decision. think it’s worth roughly $320-$330k and I owe about $330k. I estimate it’ll be $5-6k in costs for me to close/pay off my loan plus if it sells for lower than I owe.

How do I go about negotiating the price? I was planning on renting and can cover the small monthly loss, but I would prefer to sell it the price is right. It seems mutually beneficial to both parties

[u/Subject-Bad4190]

I bought the house next to my parents last year.

• all cash
  
• no realtors
  
• but I still used a title agency to make sure that everything was recorded properly and transferred

[u/Responsible_Hunt7762]

Ask them to make an offer then decide if it want to sell or rent

[u/daytradingguy]

If the offer is reasonable and they truly have cash - you should seriously consider it. Don’t forget to factor in the ease, convenience and lack of fees. A cash sale is often as is- as the buyer truly wants the house and is willing to overlook minor things. Traditional sales are more complicated and sometimes fall through- creating unexpected additional holding costs for you. I have bought and sold many houses and if I had a 330k traditional financed sale offer including due diligence inspections- and a $320k cash as is offer- I would take the cash offer every time.

[u/Clyffindor]

Get it appraised

[u/Rough_Car4490 → u/Clyffindor]

Not a bad idea but could easily be just throwing away $500 if the buyers not even on the same page to get the seller out from under it. Seems like figuring that out should be step 1.

[u/SunshineIsSunny → u/Rough_Car4490]

Figure out what the house is worth, then negotiate with neighbor. Front end cost is $500.  

You are suggesting they negotiate with neighbor, then figure out what it is worth.  Save $500 on the front end, but could lose tens of thousands because no one is sure what the value is. 

Do the appraisal first. Also, know that no-contract appraisals have a tendency to come in low.  Get the appraisal done. Don’t share it with the neighbor. Let that number be the floor. 

[u/superash2002 → u/Rough_Car4490]

If the neighbor doesn’t work out and they sell to another service member the VA requires appraisals and could help them sell it faster.

[u/DHumphreys]

Why would you keep a property that doesn't cash flow and makes you a long distance landlord? That is a hard pass.

Most "I want to buy this" neighbors never follow through unless the price is well under market, which it sounds like you cannot do.

Getting an appraisal is tempting, but bear in mind that you could get 3 appraisals and get very different valuations.

Do not work off of online value estimates.

You are going to need to look at recent sold comparable properties to price this and try to work out a successful transaction with the neighbor.

[u/Shadowfeaux]

I’m confused, why bother buying if you move every 4 years? I could see if you were buying cheap flipper houses and fixing them up in your spare time? But otherwise that’s an oddly short time to be knowingly selling places to move.

[u/superash2002 → u/Shadowfeaux]

Back in the day one could buy a house, get reassigned to another post, rent the house out and rinse and repeat. Then when you retire out of the military at 20 years you have 5-6 income generating properties.

Or they buy-sell-move, buy-sell-move because the mortgage was cheaper than renting. Then when you move to your final location to retire you have essentially 20 years of housing allowance saved up as equity.

This hasn’t been a thing since covid but a lot of old heads still tell younger service members to buy instead of rent.

[u/aguyonahill]

Being a distant landlord has a cost as well. Even if you take a small loss I'd find a way to sell.

[u/raliegh_]

“You can cover a small monthly loss” , what about vacancy, repairs, damage or bad tenants?

Have the neighbor make you an offer. And don’t buy while you’re eligible for orders, you’re playing a dangerous game.

[u/FIRE-trash]

Figure out what your break even is, and offer it to him for that amount. Loan payoff plus selling expenses

[u/AnnArchist → u/FIRE-trash]

Lol wut no. Don't toss away any equity

[u/JdorianIRL → u/AnnArchist]

There is no equity, and if this guy doesn’t buy he is left with selling at an even greater loss or losing money monthly renting.

[u/FIRE-trash → u/AnnArchist]

Not even the negative equity? Lol

[u/rosebudny]

This sounds like a no-brainer decision.

I’d sell it to him at market rate less what typical broker fees would cost. I would find an agent (or maybe just a real estate attorney depending on where you are) who would agree to handle the sale for a flat fee.

[u/SunshineIsSunny → u/rosebudny]

Sell at market rate period. Don’t discount it for realtor fees. 

The house has more value to the neighbor than it does to some random person. He can pay full market rate. Pocket the realtor fees. 

I’d hire an attorney to negotiate the contract and close the sale. Don’t hire a realtor in this case. By the way, I’m a realtor. 

[u/Rough_Car4490]

#1 try not to get your hopes super high. There’s ALWAYS a neighbor that wants to buy…and they rarely do. Doesn’t mean you shouldn’t at least try though.
#2 look at comps and find out what they’re selling for. Not what they list at, but where they close.
#3 figure out your breakeven# and your “what it takes” #. If you’re not willing to bring more than say $5k to closing, there’s really no negotiation….you just give a number and they either take it or they don’t. Even if you don’t have an agent, you will still have other costs that you’ll want to figure out before you give your number.

Edit for the downvoters: for #1, I’ve taken at least 20 listings where I’ve had to add an exclusion that if so and so neighbor buys the house, I won’t have to be involved and won’t be owed a commission unless otherwise agreed upon. It’s happened exactly 0 times.

[u/RealEstate-ModTeam → u/[deleted]]

NO PROMOTION, MARKETING, SOLICITING, ADVERTISING or AMAs. No links to blogs, social media, youtube etc. We are not here to help you create your app or send traffic to your website.

NO INVESTOR RECRUITMENT, NO LEAD GENERATION, OR MARKET RESEARCH.

[u/EcstaticEnthusiasm50]

Ask an agent to give you a price be honest with them that you are planning to just sell to the neighbor they should be able to give you a price with pics. If you are in illinois I'll gladly do it. You will probably have to bring cash to close unless it's worth more than you think. Get an attorney and go through attorney and title with no agent fees. Renting will not only cost you 4-500 a month it will cost you any repairs or unpaid rent and theres no guarantee the price will go up.

[u/urdirtyguy]

It's easy, but is it the best financial decision?  You're dealing with an asset over a qtr of a million dollars.  I'm a realtor, and would challenge you to know what you're homes worth. You can have realtors come over and give you a FREE home evaluation.  Most people buy homes online, but open houses, online tours, marketing etc is what the realtor will help you perfect.  You can always go back to your neighbor and negotiate the price once you know what the market is saying.  I'll give you a free home evaluation if you DM me your address.  If you decide to rent then your home should appreciate 3 -5% per year.  Where will that put you in 20-30 years?  Could this be a nice ticket to retirement?  Don't take the funds now because its convenient.   Take them if it makes sense. 

[u/Pleasant_Bad924]

One challenge I see is neighbors who do this without realtors always seem to expect to get a discount on the sales price because no one is paying realtor fees. It sounds like you’re not in a position to discount the home (because you’d have to come out of pocket to pay off the mortgage).

Run the numbers and figure out what’s the absolute bottom price you can afford to accept. You don’t need to sell at that price - you can hold it - but you want to know that number BEFORE you enter negotiations.

[u/Girl_with_tools]

Consider hiring a Realtor for a flat fee to help you with pricing, putting together the offer/acceptance for you and neighbor, and handling the transaction.

[u/quallityovrquantity → u/Girl_with_tools]

Horrible advice 

[u/flipflops81]

sell it. get a realtor involved. do not keep a property that isn't going to cash flow and definitely don't keep a property if you don't want to be a landlord. I would try to get rid of it as priority number one.

Edit - real estate attorney.

[u/Boughtthetshrt → u/flipflops81]

I wouldn’t get a realtor involved to just take an extra 3-5% away from the seller’s bottom line! Appraiser, attorney, sure, but a realtor’s job is to find a buyer/find a home for a buyer and those jobs are done

[u/SunshineIsSunny → u/Boughtthetshrt]

I agree with you. I’m a realtor. 

In this case, hire an attorney and appraiser. 

[u/flipflops81 → u/Boughtthetshrt]

Yeah. Going to fast in the AM. Meant to say real estate attorney.

[u/Outside-Ad7848 → u/flipflops81]

Why involve a realtor who knows nothing 

[u/spankymacgruder]

If it's close to base, keep it and rent out individual rooms. You will make more money and cover your shortage.

[u/SunshineIsSunny → u/spankymacgruder]

Often there are local ordinances against renting individual rooms. Check that out before you do this.