# Let to buy - between private seller & buyer



## Eurofan (22 Sep 2010)

We are discussing the following offer with the agent for a house in which we are interested. The asking price is €275,000 with no current offers. It had gone sale agreed earlier in the year but the prospective purchasers were unable to obtain finance.

What we are discussing doing is offering a 'let-to-buy' option to this vendor of a 25 month lease at €1000 a month(slightly below market rate) with this money going towards a pre-agreed purchase price at the end of the lease term (say for arguements sake the asking price of €275,000).

We will also undertake some upgrade works to internal painting & redecorating, bathroom upgrade etc at our own cost. The house is in considerable need of this and we have family members in the trade who would be able to undertake these things very cheaply for us.

At the end of the 25 month lease we want to be able to take up the purchase at that time or walk away;

If we choose the latter the vendor naturally keeps the €25,000 in rent accumulated in that period and has a considerably upgraded house to either put back on the market on rent on to someone else. The house had been rented for many years prior and the vendor is simply retired and moving on from the the hassle of being a landlord.

If the former then the vendor has the sale price already agreed some two years earlier with us and we complete the sale less the €25,000 already paid, i.e. we complete at a price of €250,000.

We are currently renting and have approx €160,000 in savings via an  inheritance. We have one income of €28,000(my partners) but no other  debts. However my own credit report is blemished due to my business  going under approx 4 years ago. Everything in that regard was settled at  the time but naturally remains on my icb report and I am not currently  employed. I am back in college with another two years remaining to  completion of my degree.

From our perspective it would actually reduce our immediate monthly outgoings as we are already paying a similar amount in rent but it is in a location much further away from work and college than this house (thus reducing commute costs considerably both time and money). It would also allow me to finish my degree, assess my employment prospects at that point and allow time to repair my icb report. The property is one in which we would be interested in settling long-term.

I'm very interested in opinions on this in particular how this would be approached form a legal perspective (i.e. rather than legal _advice_ per se more if this approach is possible). My main concern is ensuring that the agreement is binding on both sides. Thanks in advance to all for reading.


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## Brendan Burgess (22 Sep 2010)

Hi Eurofan

Have you tried to edit the title yourself?


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## Brendan Burgess (22 Sep 2010)

Hi Eurofan

What is in it for the vendor? 

You are asking for an option to buy his property at today's price in two year's time. 

If prices rise, presumably you will buy it.

If prices fall, presumabuly you will not buy it. 

If I owned a house worth €250,000 and someone asked me for an option to buy it at today's price in two years' time, I would find it difficult to value that option. Roughly speaking I would guess I would charge the following

1) payment of €25,000 up front now to buy the option.
2) payment of the normal market rent for the next two years - I would probably ask for it up front
3) €250,000 in two years. 

Alternatively, I might consider giving you a two year lease at the market rent with an option to buy at €275k. But I would still want a payment up front for that option. 

Brendan


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## Eurofan (22 Sep 2010)

Brendan Burgess said:


> Hi Eurofan
> 
> What is in it for the vendor?
> 
> ...



I would think it's very clear whats in it for the vendor. He get's to lock in his desired sale price now with the fallback in two years time of €25k in hand and a much upgraded property.

Crystal balls aside price fluctuations are not the determining factor in the decision. Our own circumstances at the time will be. Prices hardly seem likely to rise (lets not go there though) so I would have thought the option for the vendor to lock in todays price now would be attractive. Surely this is the impetus behind similar offers from developers or am I missing something?



Brendan Burgess said:


> If I owned a house worth €250,000 and someone asked me for an option to buy it at today's price in two years' time, I would find it difficult to value that option. Roughly speaking I would guess I would charge the following
> 
> 1) payment of €25,000 up front now to buy the option.
> 2) payment of the normal market rent for the next two years - I would probably ask for it up front
> ...



I appreciate the input but surely given the market conditions at present that would seem like a ludicrously optimistic position to take? Rather than expecting a premium for the option to buy later we are attempting to offer some insurance against further price falls. Bear in mind both the current rental market (it has been unoccupied for almost a year) and sales market (no need to elaborate there).

The current buy to let options on the market differ considerably from your position where the expectation is clearly for a continued fall in house prices and a desire on the part of the sellers to extract some value now. I am hoping to be reasonable in any offer but also realistic to market conditions. I would expect the same realism from the vendor.


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## Eurofan (22 Sep 2010)

Brendan Burgess said:


> Hi Eurofan
> 
> Have you tried to edit the title yourself?



Done, thanks for the link.


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## lexxie (22 Sep 2010)

Eurofan said:


> We are discussing the following offer with the agent for a house in which we are interested. The asking price is €275,000 with no current offers. It had gone sale agreed earlier in the year but the prospective purchasers were unable to obtain finance.
> 
> What we are discussing doing is offering a 'let-to-buy' option to this vendor of a 25 month lease at €1000 a month(slightly below market rate) with this money going towards a pre-agreed purchase price at the end of the lease term (say for arguements sake the asking price of €275,000).
> 
> ...


 
I think youre being more than fair...in fact very generous really its a no-lose for the vendor imo an absolute no-lose he/she should snap your hand off!  I'm sure others would like to know the legal situation too unfortunately I cant help there though...  To be honest I think he/she shlould be paying you the initial 25K to lock you in especially if he/she is getting 'eager' we'll say to sell???


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## greentree (22 Sep 2010)

Why don't you just buy the house if you want it? Seems like a lot of messing around to me...


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## Eurofan (23 Sep 2010)

greentree said:


> Why don't you just buy the house if you want it? Seems like a lot of messing around to me...



As I mentioned in the first post 'It would also allow me to finish my degree, assess my employment prospects at that point and allow time to repair my icb report.'. Due to the latter our prospects of obtaining a mortgage at the moment appear to be very difficult. That said it is an avenue we are pursuing but the 'let to buy' option may be a better all round alternative.


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## LDFerguson (23 Sep 2010)

If you're not married, perhaps your partner could buy the house now, with the correct legal agreements in place.


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## mro (23 Sep 2010)

I think it sounds great for you but not great for the vendor

You get to rent a house at slightly less than market rate, and then buy the house in two years time (albeit at a price agreed now)

You say the vendor gets to keen 25000 but that is rent not a deposit. He gets nothing from the transaction. If i was the vendor why wouldn't i just continue to rent the house out and 'keep' the rent. 

Also you say he gets a "considerably upgraded house" if you decide to not proceed with the purchase but no offense to you but who is to say your idea of an upgraded house would match the vendors...what if you taste is a bit "alternative", in two years time it might cost the vendor to put it back on the market in a state that will attract as much interest as possible. 

If i was a vendor I'd never agree to this unless, as Brendan has said, there was an actual cost to the option.


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## Eurofan (27 Sep 2010)

mro said:


> You say the vendor gets to keen 25000 but that is rent not a deposit. He gets nothing from the transaction. If i was the vendor why wouldn't i just continue to rent the house out and 'keep' the rent.



Because, in this vendors case, they are concerned that general rental income will not even cover continued depreciation of the property. This is why they are selling. They also don't wish to undertake the investment required _now_ to bring the property to a rentable level.



mro said:


> Also you say he gets a "considerably upgraded house" if you decide to not proceed with the purchase but no offense to you but who is to say your idea of an upgraded house would match the vendors...what if you taste is a bit "alternative", in two years time it might cost the vendor to put it back on the market in a state that will attract as much interest as possible.



You at least gave me a good laugh here. We are in no way 'alternative' in our tastes I can assure you! None the less it is a valid point and I had assumed the owner would have to pre-approve any such modifications in advance and become subject to the agreement. It's current state requires work to even move in as the last tenants were not, shall we say, clean-freaks (or even hygiene concerned). 

It is not actually livable right now and believe me you don't need to hear the details of that! The last time any work was done on the property is in the order of thirty years ago.

The bathroom suite needs to be changed, all flooring needs to be removed and replaced and while decorating may indeed be a matter of taste it is in such poor order as to be, in my opinion, a health & safety issue. The kitchen could certainly do with a change as it is many decades old but it is not in as poor a shape as the rest of the house. All of the above we would be undertaking to change at our own expense and as you quite rightly bring up; with the owners approval.



			
				LDFerguson said:
			
		

> If you're not married, perhaps your partner could buy the house now, with the correct legal agreements in place.



We are married and would insist on keep everything above board.


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## FioBi (27 Sep 2010)

We have a property for sale at the moment and have been approached about a Let to Buy. The conditions are:

15K Non Refundable Deposit up front
1000 per month rent (normal rent 700 in the area)
Option to purchase remains in place for 2 years

Both of the above would goes towards the tenants deposit and therefore would reduce the sales price

Its a new property and they want to make improvements to the property but accept that if they walk away from the deal they would not be entitled to anything for costs of upgrades precisely for the reason above we may have to redo anything that has been done. 

If the tenants decide not to buy we have a property that is two years older and now stamp duty would be applicable in any future sale.

The tenants also accrue rights under legislation and therefore it may not be that easy to get them to leave. They can sue us for the costs of the upgrades even though they would have signed an agreement to say that they would not expect to be paid for them. They would likely lose the case but it could be a costly court case.

The tenant has the right to walk away but the owner does not.

The owner has to continue to pay insurance on the property, the NPPR, interest on any loans on the property and potential property tax.

Also owner has to pay 3/4 of full legal costs as if it were a sale and half the estate agents which is a very expensive let.

All in all a terrible deal for owners and a great deal for buyers. It is truly a buyers market.

By the way, we are not proceeding with the deal as we would rather sell for less and get the cash now and be done with the property.


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## FioBi (27 Sep 2010)

I forgot one important condition that is normally applied on this types of sales. You must prove that you can get a mortgage by producing an offer letter from a bank that is no more than 1-2 months old.


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## Eurofan (27 Sep 2010)

FioBi said:


> We have a property for sale at the moment and have been approached about a Let to Buy.



Very interesting info FioBi thank you for posting this.


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