Selling your home and buying a new one can be stressful and expensive. If escrow closes before you’ve found your new home, you may need to rent temporarily.
To avoid moving twice, some sellers negotiate sell and rent-back agreements with their buyer. A rent-back agreement lets you remain in your home while you find your next perfect castle (or otherwise), and are ready to move. Phew!
Of course, rent-back agreements must work for both buyer and seller. If an investor buys your home, the process may be straightforward. But things get complicated if your buyer must vacate his or her home when that escrow closes. To protect both buyer and seller, it’s important to specify the agreement details.
Unless you’ve negotiated otherwise, your buyer will probably want you to cover the mortgage, interest, taxes, and insurance while you remain in your old home. (Who wouldn’t?) This amount can be prorated to cover only the days you’re there.
In addition, you and your buyer should decide who pays the utilities, what the home’s condition should be when you move out, the security deposit, the buyer’s right to enter the property, the length of the seller’s stay, and more. You’ll also want to purchase temporary renters insurance to cover your possessions in case of disaster.
If you think all that suggests a high potential for conflict, you’re right. Although a rent-back saves you the hassle and expense of moving twice, rent-back arrangements aren’t for the faint of heart. Most of us are emotionally invested in our home. Releasing ownership while remaining in your old, familiar digs can lead to resentment or even grief. Expectations are easily misunderstood by both parties.
An experienced listing agent can guide you through the rent-back process. For arrangements less than 30 days, you’ll complete the Buyer in Possession addendum. If your stay is longer, a standard lease agreement will be needed. Note that if a home is rented for more than 90 days in California, it is considered a commercial property; the buyer must finance it as an investment. Lengthy rent-back arrangements are uncommon.
If renting back might work for you, we’d love to help. Give us a call at (831)818-4321, or contact us here.
Not up for a rent-back? Click here to learn about contingent offers.