Pros and cons of Rent Back

This market has brought several challenges. Sellers who cannot and / or will not move until they know the money is in the bank and the title has been transferred. Many sellers request to retain possession and / or rent after the escrow closes. Normally up to 30 days. I’ve seen some that take up to 90 days.

Pro- Because the seller definitely assures them money in the bank and the funds to be able to move.

Provides breathing room to pack and locate another home.

It allows more time to clean the house per se … that is, sell items that are not necessary and / or donate them to a charity or throw them away.

Buyer – In a seller’s market, this could be a deal breaker in a multiple bid situation.

The buyer can confidently notify the current location knowing that they will have a defined home on this or that date rather than notifying when the deal is not finalized.

Things to consider for both parties … You have now gone from Seller / Buyer to Tenant / Landlord … The consideration should be posted to the escrow for rentals. We typically determine leasehold rentals by taking PITI (principal, interest, taxes, and insurance) buyers on their new 30-day split loan and have the escrow company retain the amounts agreed to in the purchase contract. Everything is negotiable. Must be determined in writing prior to escrow closing. The buyer should make sure that the insurance is current. The seller must verify with their 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 the maintenance of the house for any repairs that may be necessary. I would suggest that a home warranty be obtained to cover unexpected problems that may arise. Murphy’s Law always appears after the sale in one form or manner. Some disapprove of leases, but if done correctly, they will be of great help to both parties.

Can complications occur? Unfortunately, yes … sometimes sellers have not made the proper arrangements and feel they can take advantage of staying longer than agreed in the contract, leaving the house in total chaos, not reporting broken items, etc. Buyers get impatient and want possession sooner.

Escrow instructions need to be mutually agreed, to keep a little more as a deposit for the peace of mind on the buyers side.

The insurance company of both parties should be contacted to ensure that there are no misunderstandings in the event of fire and / or other natural hazard resulting in claims.

Have a written contract or instructions on the details of the subsequent lease. Remember that failure by either party could result in litigation.

Most leases go smoothly. Just KNOW your rights, whichever side you are on and ALWAYS have a written contract or instructions to re-lease.

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