What is a rent-back?
Rent-back is an agreement between a home buyer and a seller that lets the seller stay in the house for a given time while looking for another place.
In real estate, things do not always go as planned due to the complexity and competitiveness of the market. Sometimes buyers put their properties on the market and sell them before finding other places to live. This happens countless times and everywhere.
When sellers close deals on their houses before finding new homes; they can negotiate with buyers and stay in the houses a little longer. The seller can buy themselves a time to find another house by becoming tenants of the houses they just sold through the rent-back process.
There is a time limit to how long a seller can rent-back the house and it varies from one buyer to another. Usually, a few months are enough for the seller to close on their new house. Sometimes, the seller’s agent and buyer’s agent work together to make sure that everyone is on the same page.
Main issues to discuss during a rent-back agreement
There are two main parts to focus on when a seller and a buyer are signing the rent-back agreement.
The part of the discussion is how long the seller of the house will rent-back the house. This time will depend on how long the new owner is willing to give the seller of the house. Some buyers do not allow more than two months, according to Realtor.
The second part to cover during the rent-back agreement is the rent. The buyer of the house will determine the rent based on the market and location. Usually, the buyer and seller come to an agreement very easily to ease their transitional periods.
Benefits of rent-back agreements
A rent-back agreement helps the seller of the house as it buys them more time to find another home. For example, if you are building your dream home and ended up selling your current home; the rent-back can give you more time to finish the house you are building.
Another example that happens very often is when sellers find buyers of their homes before they find another one. So, a rent back gives them the time needed to find other houses or close sales on the ones they found.
Buyers can also benefit from the rent-back as they collect rental income. There are times when a buyer of a property can close a deal while their leases are still in effect. Having a rent-back agreement can save them by protecting them from breaking the lease while making money on the new house.
