FAQ : What Is A Rent-Back Agreement?
At most residential real estate closings, after all the paperwork is signed and the final transaction check has been handed over, the new buyer is handed a set of keys to their new home. It’s all theirs! They now have the right to move in and possess their new home. However, some closings do not end so neatly.
From time to time in our experience dealing with the Omaha housing market, we’ve had to deal with a situation where the seller wants to remain in the home after closing on the sale. This can happen for any number of reasons, but generally involves the seller’s new home not being ready for them to move in yet.
What Is A Rent-Back Agreement?
A rent-back agreement, or post-closing possession, is an agreement between the buyer and the seller of the home. The seller is requesting the right to stay in their old home for a specified amount of time, most commonly a few days to a few weeks at most, once ownership has been transferred to the new buyer.
Who Does A Rent-Back Agreement Benefit?
A rent-back agreement is potentially risk-free for the seller, as long as they’ve calculated their stay correctly and have agreed to the rate up front.
One major advantage to a rent-back agreement is that it can give buyers a competitive edge over other offers on the home. (A few weeks ago, we wrote about offer letters offering a competitive advantage, too.) In today’s seller’s market, every little advantage can be helpful!
On the other hand, the new buyer who is allowing the seller to stay in the home can be at risk for certain events, which is why this type of agreement needs to be put in writing.
One event to take into consideration is that the seller won’t be able to move out on the stipulated date.
Another occurrence that could happen is that the property won’t be in the same condition as it was at closing.
Both of these events can have the effects written into the agreement and consequences can be spelled out.
What Can Be Negotiated In A Rent-Back Agreement?
The biggest negotiation is most likely going to be over the price. Rent-back agreements can have “per day” costs associated with the house, and if the seller wants to stay past their estimated date of renting, then the costs may even climb to a higher rate. The buyers will want to consider these factors when setting their price: their new mortgage payment, insurance rates, taxes, utilities, etc.
The most important thing we can stress with a rent-back agreement is that everything needs to be in writing. Because there are so many legal issues at play, it’s not a good idea to leave anything to chance or open to misinterpretation.
If you and your family are preparing to sell your home or are getting ready to start house-hunting, contact the Fairfield Team and we can help you get started or answer any questions about the Omaha housing market!