Fred Meyer, a veteran real estate broker, helps homebuyers find property in the vicinity of Harvard University, a high-cost area where it’s tough for many purchasers to locate a property they can afford.
But through the years, he said, numerous clients have landed exceptional deals on houses occupied by tenants.
“Houses that are rented are hard to show and can’t be staged to bring out their best the way owner-occupied properties can. That means there’s less competition among buyers, which can sometimes translate to a below-market price,” Meyer said.
Though some rented houses are true “fixer uppers,” others are simply messy and need only surface upgrades, like interior painting or in-depth carpet cleaning.
Those rare buyers who can envision the potential of a house with merely superficial problems are often richly rewarded on price, according to Meyer.
Meyer recommends that homebuyers with affordability challenges open their minds to the possibility of purchasing a rental property that needs a limited amount of work.
“If you’re handy, this could be a very good buy for you,” he said.
Still, he allows that some buyers are so wary of living in a house that’s served as a rental that they won’t even bother to visit the place, let alone consider buying it.
Dorcas Helfant, a realty company broker-owner, said that in many areas there are now an abundance of renter-occupied houses on the market. These include many that are owned by individuals who’d been waiting for the rebound in property values before trying to sell.
“Lots of people really dislike being a landlord, especially if they’ve moved far away and are trying to manage their rental remotely. Because they’re often very anxious to sell and free themselves of this headache, they’re willing to negotiate seriously on price,” said Helfant, a former president of the National Association of Realtors (www.realtor.org).
Here are a few pointers for homebuyers considering a renter-occupied house:
• Plan your visit to the place when the tenants are absent.
With some exceptions, those living in a house that’s rented are unhappy that their landlord plans to sell.
“Some renters are extremely angry that they must uproot. To get back at their landlord — and try to sabotage a potential sale — they’ll leave the house in a very messy condition and make comments designed to drive away buyers,” said Sid Davis, a real estate broker and author of “A Survival Guide for Buying a Home.”
In addition, some tenants exaggerate small issues and may even claim a house has problems that don’t exist.
• Make sure you obtain an in-depth home inspection.
Some rental properties are overseen by professional management firms. Even so, such homes rarely get the same level of continuous scrutiny as those occupied by their owners, who typically feel a pride of ownership. That’s why Davis said it’s critical to make any bid conditional on a satisfactory home inspection.
“Every property needs a home inspection, but this is especially so if tenants have been living there,” Davis said.
To locate a good home inspector, he recommends you ask your real estate agent for the names of at least 10 candidates. Then interview three by phone before choosing the one you judge the most competent.
“It’s a very bad idea to select any inspector who’s in the home-improvement business. This represents a major conflict of interest, especially if the inspector tries to persuade you to also hire him for repairs,” Davis said.
What if the inspection reveals only a few very minor problems? Then the rental property could qualify as a true find that could sell under its market value for the sole reason that tenants have lived there.
• Obtain cost estimates for necessary repair projects.
Davis, who once owned six rental houses, learned from experience that tenants often fail to tell their landlord about problems unless they become serious.
“The people living in the house could be aware that the dishwasher has been malfunctioning for months. But the landlord will never hear about the problem until a home inspector determines that the dishwasher leaks and must be replaced, along with the flooring underneath,” he said.
Davis said a potential buyer of a rental property — or any home for that matter — needs to know how much the necessary repairs will cost.
• Seek out a “diamond in the rough” among renter-occupied properties.
“Because of the stigma attached to rented houses, you can sometimes get a terrific deal because the pool of willing purchasers is relatively small. All you have to do is think past the stigma,” Davis said.
“You can’t judge a book by its cover, and this holds true in real estate as well as life in general. If you’re that rare person who can see beyond the unmade beds and dirty dishes left in the kitchen sink, you could be a real winner,” he said.
To contact Ellen James Martin, email her at firstname.lastname@example.org.