Buying a House Privately
Buying a house privately can come in different ways.
One of the most common is when your landlord is looking to sell and offers to sell the property to you as the tenant. Ideally, well before they speak to any Real Estate agents.
Other scenarios of buying privately include neighbours or friends looking to sell off market, parents or family members looking to sell off market and finding sellers through personal networks or Facebook groups.
Now to be clear, we are not talking about selling privately, this article talks about it from a buyer’s perspective and how that pertains to gaining finance.
One of the most common situations we work with is the tenant looking to buy a house off the landlord. And there are some things to be wary off if looking to do this.
Buying a house privately has various pros and cons, including:
The Pros:
- Potentially able to buy the house with no market competition
- Potentially able to buy the house at a price less than the market value
- If you already live in the house, you don’t have the stress of moving stuff
- You know the strengths and faults of the house if you already live there
- Negotiate straight with the seller, no middleman
- Potential for the seller to give you time to get your ‘ducks in a row’
- If it’s a family member, there may be a chance for some equity to be gifted and used as part of your deposit if buying under market value
The Cons:
- Potentially may pay too much for the house
- As a private sale, the bank may ask for a registered valuation, costing around $1000 (which helps eliminate the above point)
- Private sellers can be impatient and do a U-turn at the last minute. This typically happens if a Real Estate agent has got in their ear to list with them
- You can end up spending money on legal bills and the deal falls over
- You have a stubborn seller that is difficult to deal with or not good with communication, meaning wasted time and money
As mortgage advisers, we often see private sellers change their minds on selling or decide to sell on the open market at the last minute. So, try and get in writing (eg. email) an agreement of sorts on price and any conditions ASAP. It’s customary for the buyer then to coordinate the official Sale & Purchase agreement via their lawyer. Once you agree on terms and price, organise a Sale & Purchase agreement quickly so you can seal a deal.
Buying your house off the landlord can be a great option, but it is a process, and it pays to engage your Mortgage Adviser early on to determine borrowing power.