Money Guide Ireland

There has been a sudden increase in property owners offering “Rent to Buy” schemes all over Ireland.

Is this just a marketing ploy to rent houses that property owners can’t sell or is it a viable option for first time buyers?

We’re seeing more of these rent to buy offers because there’s a growing backlog of unsold homes and prices are stagnant or falling in most parts of the country. That has left some owners – particularly investors and developers – with a problem. So now they’re trying to rent them.

Sellers can probably benefit from rent-to-buy agreements more than buyers. Not only can the seller lock in a price before property values plunge further, but they also collect market-rate rent until the closing.
It is not unheard of for developers and agents to use a purchase option to justify higher rents and lock you into a purchase price that’s higher than those of  comparable houses.

The many schemes that go under the banner of rent-to-buy vary dramatically, and the small print can change from one company or developer to another.
Offering to credit part of each month’s rent toward the purchase price of the home is the key element of any “Rent to Buy” deal.
They also often require you to pay a deposit. It is non refundable, but it is usually also credited toward your deposit.

The date at which the agreement expires varies by contract but is typically between two and five years. At that point, the renter can choose to buy the home at the original listed price minus the equity he or she has built. If not, then the homeowner has the option to evict them and keep all payments.

Making a rent-to-buy agreement in an area where house values are still dropping can be risky. That’s because you’re negotiating the purchase price for a property now that you may not actually buy for more than a year. That could easily result in overbidding. The monthly rent should also be on par for the market. With rents declining, in many places, you could end up paying more than the market rent over the next few years.
If property values were increasing – Rent to Buy would look to be a good option – but would many owners be offering such schemes if property prices were going up? I doubt it.

Always obtain independent legal advice before entering into a Rent to Buy contract. Do not accept legal advice from the vendor the agent or the vendor’s solicitor.

Estate Agents in Ireland typically charge between 1% and 2.5% commission on the sale of a house. Even with house prices falling – the average selling price is still about €256,000.  An estate agents commission on this – based on 1.5% would be a tidy sum of €3840 . Then there is the VAT which brings it to €4646.

The rate of commission charged should vary depending on the value of the house. The commission on a house below say  €500,000 may be 1.5 per cent – while a property worth a Million euro may be charged at 1.25 per cent . You can (should) try to negotiate the fee downwards . Some estate agents have a minimum fee for low priced properties – but I doubt if many set a maximum charge?

The percentage commission means that the bigger price the agent gets for your house – the bigger their fee. On a 250k house a difference of €5k on the selling price means quite a lot to the seller – but to the estate agent it means just an extra €75 euro. It might be more cost effective to the agent to sell it quickly at the lower price.

Many estate agents in Ireland add on extra charges to the sale commission. Many of these charges are payable even if the house does not sell. Extra charges can include  photographs, brochure , website listing ,  sale board, newspaper advertising.  These extras can soon mount up to as much as another  €1,000. Some auctioneers and estate agents are now asking for money up front to cover   advertising costs . In the UK it is very common for esate agents to have “No Sale No Fee” arrangements  – and they still put your house on the web and in the newspapers.
Here in Ireland the “no sale no fee” arrangement is gradually becoming more common – but still in the minority.

One option to consider is to try and sell your house without involving an expensive estate agent or auctioneer. According to this report in the Irish Times - you could be better off avoiding them anyway.
There are a few websites in Ireland offering to help you sell your house. The biggest is probably Daft.ie – they have loads of properties mostly from estate agents and some from private sellers. For a fee of €195 you can add your house to the site.

Another smaller but growing site is the Sell ItYourSelf site. For the same €195 fee you get your home listed on the site with 6 pictures and unlimited description. You also get a For Sale sign to put up outside your house (to attract passing buyers). They also have a telephone helpline to give advice about selling your home. Sometimes bigger is not best . Check out the Sell it Yourself website here.

Other For Sale By Owner Sites in Ireland

Privateseller.ie charges €199 to list a property with photos and a for sale sign.
Housefinder.ie charge €49 euro for a 3 month listing with photos.

A good website for selling houses needs to be easily found by potential buyers. If they can’t find it – they won’t see your house for sale. The Sellityourself site is consistently on the top page on google searches for property for sale in the various towns and counties in Ireland.