After a Cash Sale, Can I Rent My House Back?
After selling your home, the buyer expects you to pack up and move out of the house within 7-10 days. However, you don’t have to leave your old house almost immediately after selling it. You can get into an agreement with the buyer where you pay rent and stay for as long as you want. These rent-back agreement benefits both you (the seller) and the buyer in different ways. Keep reading to learn more about real estate rent-back agreements and how they work.
The Meaning of a Rent-Back Agreement
A rent-back agreement is a lease or rental agreement between a home seller and buyer, allowing the seller to stay in the house after the closure date but pay rental payments. This deal is also sometimes known as ‘sell and rent back’ and comes in handy when the seller experiences some difficulties in moving to a new home. It can be due to financial challenges, or the home they are moving into is not yet ready for occupancy.
Situations You May Need to Rent Back Your ‘Sold House’
- When building a new home you intend to move into, but the contractor informs you that the home won’t be ready by the closing date. It’s better to rent the ‘old house’ instead of going to a hotel or renting another home temporarily.
- When you have school-going children, and you would want them to complete the year in their current school before moving out.
- When you get a good offer from cash Tampa home buyers, but you haven’t looked for a place to move into. It would be better to sell the house and rent it back while you look for a new house.
How Does Rent-Back Agreement Work?
Seller rent-back agreements (also known as seller lease-backs), in which the seller rents back the home from the buyer for agreed-to terms, have become increasingly common in this market. In the past, agents have typically steered their clients away from rent-backs to avoid complications, but many agents are now embracing them as a temporary solution for tough housing climate. (1) But how does a rent-back agreement work? Here is the simplified process:
Consult an Attorney and Notify the Lender
Both parties should consult with a real estate attorney to help them understand the terms and what to expect during the leaseback period. The attorney will help you know the potential issues that may arise and help you know how to navigate through or avoid them. The lender should also be notified about this agreement so that they can give approval.
Seller and Buyer Sign the Rent-Back Agreement
Once you are aware of what you are getting into, you will be required to fill in a legally binding document for the agreement. The document contains details like the rent-back lease period, security deposit amount, rent per month, additional insurance fees, and more. In addition, the document should capture who pays the utility bills and home maintenance expenses during the leaseback period.
Alternatively, Use a Seller in possession (SIP) Form
You can also use the seller-in-possession form to document the rental agreement. You can use this form if the lease period is 30 days or less. This form also has the rental rate, lease period, and who is responsible for the home repairs and utility bills.
Is Rent-Back Agreement a Perfect Idea?
Yes, it is a perfect idea, as it benefits both the seller and the buyer. But before you sign this agreement, you need to think critically. Let’s look at the benefits of this agreement to the seller and buyer:
Benefits for Sellers
- You’ll have ample time to look for your dream home. You can extend the time for one month or two, and this will be enough time to get a perfect home for your budget.
- Helps you avoid moving more times than necessary: If you sell the house to a we buy houses Tampa company and move out in a rush, you will likely move to house you don’t like and will be forced to move out sooner. Alternatively, you can rent a smaller house temporarily and then move later when you find the perfect house.
- Have peace of mind and avoid costly mistakes during this process. You won’t rush to buy or rent a new home, hence avoiding common mistakes people make.
Benefits for Buyers
- They earn a rental income: the buyer receives a rental income from the seller, which they can use to pay mortgage payments, legal fees, and closing expenses.
- It makes the offer more attractive to the seller: If the seller needs a place to live in for 30 days or more, the buyer can offer to let them stay, and that might tilt the deal in the buyer’s favor. This deal can make even a seller who wasn’t ready to sell the house sooner to sell it immediately to the buyer.
Is Real Estate Rent-Back Agreement Risky?
Although the rent-back agreement has many benefits, it also has its drawbacks to both the seller and the buyer.
Risks for Sellers
- A relatively expensive rental payment – On top of the monthly rental payment, you will likely pay for home maintenance and utility bills, security deposit, and extra insurance fees. And the total cost can even be more than your monthly mortgage payment.
- You risk losing your security deposit – if the home is damaged during the leaseback period, your security deposit will cover the damages.
- You can’t make permanent changes to the home: Even if you owned the house before, this time, you won’t be able to make any permanent changes to the house.
Rent-Back Risks for Buyers
- You take the responsibilities of a landlord, which include creating a lease document, collecting rent and security deposits, and more.
- You won’t move in as soon as you desire – the seller will stay in the house for a certain period, and your move-in schedule must be moved to a later date.
- A possibility of the new tenant (seller) not moving out as scheduled – The buyer has to evict them, and that will take time and money.
Although a rent-back agreement benefits the seller and buyer, it has some drawbacks. So you, as the home seller, should consider the expenses you will incur and why you can’t move out at the closing date to make the right decision. After selling your home to we buy houses Tampa FL company, if staying in is worth it, you should rent-back the house and move out when you are ready.