How to Make a “Rent Back” Work

How to Make a “Rent Back” Work

For sellers who need to sell first, the nagging question is: Where do I  move when this house sells?

There are many low-inventory markets  around the country. It’s usually easier to sell in a low-inventory market, but  it can be difficult finding a replacement home to buy. Finding an interim  rental is sometimes the only option. The advantage of renting temporarily while you look for a new home is  that you don’t need to feel rushed to buy a home that may not suit your needs.  Given the uncertainty in the market, you should buy only for the long run. It  could take time to find the right place.

A disadvantage of renting before buying is that you might have to pay to  store some of your furniture while you rent, and you’ll have to move twice.

HOUSE HUNTING TIP: Negotiating an option to rent back your current home  after closing may help you avoid a double move, or at least give you time to  find a suitable rental. Rentals are also scarce in some areas, so it may not be  easy to line up temporary quarters on short notice.

A rent-back agreement allows you to rent your home back from the buyers  for a certain period of time. Be aware that many lenders won’t allow the  sellers to rent back for more than 30 days after closing.

The cost of a rent-back varies. If there are buyers vying for your home,  you may be offered free rent for a period of time. However, typically, the  rent-back cost is equal to the buyers’ principal, interest, taxes and insurance  prorated on a per diem basis.

This may cost more or less than you currently pay to own your home. Keep  in mind that you do this for convenience, not because it’s the best deal on a  rental.

Sellers who think they might want to rent back after closing but don’t  have their next home lined up at the time they accept an offer should include a  clause in the contract that gives them the option to rent back for a certain  time.


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