Pros and cons of Rent Back
This market has brought several challenges. Sellers who can’t and/or won’t move until they know the money is in the bank and title has been transferred. Many sellers request to retain possession and/or re-rent after escrow closes. Typically up to 30 days. I have seen some that need up to 90 days.
Pro- For the seller it definitely ensures money in the bank and funds to move.
Provides breathing room for packing up and locating another home.
Provides more time to clean house per se…ie selling items that are not needed and/or giving to charity or throwing away.
Buyer – In a seller’s market, this could be a deal breaker in a multi-bid situation.
The buyer can confidently give notice in the current location knowing that they will have a final home on such and such a date rather than giving notice when the deal has not been finalized.
Things to consider for both parties… You have now moved from Seller/Buyer to Tenant/Owner… The consideration must be accounted for in the rental security deposit. We typically determine leaseback rents by taking the buyers’ PITI (Principal, Interest, Taxes, and Insurance) on your new 30-day split loan and having the escrow company retain the amounts agreed upon in the lease. purchase. Everything is negotiable. Must be determined in writing prior to closing of escrow. The buyer must ensure that the insurance is current. The seller should consult with his own insurance what is covered in this type of transition. The seller is responsible for maintaining the property while it is in his possession. The buyer is now responsible for maintaining the home for any repairs that may be needed. I would suggest getting a home warranty to cover unexpected issues that may arise. Murphy’s Law always shows up after sales in one form or fashion. Some frown on subsequent leases, but if done correctly, they will be a great help to both parties.
Can complications occur? Unfortunately, yes…sometimes sellers have not made the proper arrangements and feel they can take advantage by overstaying the contract, leaving the house in total shambles, not reporting broken items, etc. Buyers are impatient and want possession sooner.
Escrow instructions should be mutually agreed, to keep a little more as escrow for peace of mind on buyers’ side.
The insurance company of both parties should be contacted to ensure that there are no misunderstandings in the event of a fire or other natural hazard that could result in claims.
Have written contract or instructions as to the details of the subsequent lease. Remember that a breach by either party could result in litigation.
Most subsequent leases work without a problem. Just KNOW your rights no matter where you are and ALWAYS have written instructions or contract to re-rent.