"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 facts of this strategy differ from state to state; however, in the strong seller’s market we’re feeling, buyers will repeatedly agree to let the seller stay in the home for sometimes on condition that rent is paid. In a reasonable situation, the buyer ready to do this will sometimes have the winning bid even if there is another high offer like his.

The contract covering the situation defines the maximum time the seller will stay there.  This can be carried out with a specific date named or expression that permits the seller to stay up to a particular date with the probability of her moving sooner.

The amount can be a stable figure paid out of the proceeds of a settlement or a monthly or a daily amount. It is regularly, but not at all times, tied to the amount of the mortgage payment under the buyer’s new loan. Occasionally there is a deposit against damage, and other times there is not.  Usually, there is a clause stating the seller will hold the buyer harmless for any self-damage or his property which happens 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.  

An Example

Recently, I’ve seen a very pleasant example of this idea in action. An aged widow contracted to have a one level condo unit erected in a new community which gives all external maintenance. She had taken hip replacement surgery and desired to get away from the setbacks of the home in which she’d raised her children.

The home was big, had stairs and was located on a large, partially wooded lot with numerous mature perennials and shrubs. Both the home and garden were lovely but high regarding maintenance.

Her agreement to purchase includes a mandatory series of deposits and a firm hint as to her source of funds well before settlement on her new condo. The widow put up her home for sale. A young couple with two sons was very eager to buy it.

The condition was competitive. They made an offer to them. She refused their original offer. She did not increase their offer price, which was a little below her asking price.  She was not certain that the young the young couple would qualify for a bigger loan. Instead, she did something rather innovative.

The widow countered with an offer that she “rent back” for a time “up to” a certain date (a date further than she previously arranged competition date on the condo) in exchange for a modest flat amount to be paid to the buyer at settlement. The whole rent back period was less than two months.

The flat fee was less than the amount of the new mortgage payment for the buyers. However, since they made no payment on their new mortgage the first month, it wasn’t too far out of line. The young couple certainly needed the home, so they accepted the counteroffer.

Another win, win situation was created. The widow just had to move one time and the young couple got a house they possibly wouldn’t have in a straight bidding war. If you are in a situation that’s close to either the widow or the young couple, maybe you can work out a similar solution.