“Renting Back” After Your Home Is Sold
Sometimes it’s helpful to sell your home before you really want to move. This often happens when you are having a new home built, but aren’t sure of the completion date. Is there any way you can sell your home so you’re sure of the funds available for the new purchase, but continue to live in your old home until construction of the new one is complete. Yes, there is the renting back strategy.
Enter the Lease-Back or Rent-Back Agreement
The particulars of this strategy vary from location, but in the strong seller’s market we’re experiencing, buyers will often agree to let the seller stay in the home for a period of time as long as rent is paid. In a competitive situation, the buyer willing to do this will often have the winning bid even though there is another offer as high as his.
The agreement covering the situation states the length of time the seller will remain. It can be done with a specific date named or wording that allows the seller to remain up to a specific date with the possibility of her moving sooner. The amount can be a fixed figure paid out of the proceeds of a settlement or a monthly amount or a daily amount. It is usually, but not always, tied to the amount of the mortgage payment under the buyer’s new loan. Sometimes there is a deposit against damage, sometimes not. There is usually a clause saying the seller will hold the buyer harmless for any damage to himself or his property which occurs after the sale is completed and before the seller moves.
The attorney who draws up your contract offer can create such an agreement. If you’re using online forms, you should be able to find one for this situation. If you’re working with a real estate broker, he or she can handle it for you too.
I’ve recently seen a very pleasant example of this idea in action. I had a listing that was sold a year ago with this kind of situation. The owners of the unit were out of the country. The house was up for rent by the owner. 6 months after a couple got interested in the listing and decided to buy the property earlier than expected. The problem of the owner is that the house was being leased for a year. And they haven’t consumed their 1-year contract yet.
The couple made an offer that is quite below her asking price. The owner countered with a proposal that she “rent back” for a period of “up to” a certain date (a date beyond the contract date of the lessor) in exchange for a modest flat sum to be paid to the buyer at settlement. The total rent-back period was less than 10 months. The rental payment of the lessor will be paid directly to the new owner (the couple), but they cannot do renovations or any other movement within the property until the lessor finishes its lease contract. The couple really wanted the home, so they accepted the counteroffer.
Another win, win situation was created. The seller/owner was able to comply with the lease contract and the couple got the property. If you find yourself in a situation similar to either the widow or the young couple, perhaps you can work out a similar solution.
Charmaine Xy-Za Yape is a founding member and a blogger of Filipino Homes. She is also a PRC and HLURB Registered Real Estate Professional and a Licensed Financial and Investment Advisor. She is an International Realtor member. She is a Hubspot certified in Inbound Marketing. She is also the co-founder of Iligan Bloggers Society, Inc.