A temporary seller leaseback is simply an agreement or contract between the current homeowner and the buyer that allows the seller to stay in the home even after closing. You’ll also see this arrangement referred to as ‘post-closing occupancy.’
Depending on the buyer’s mortgage requirements, the maximum term for a leaseback is 60 days. Sellers can use that time to close on their current home sale and then stay in that house for up to 60 days while they find a home to purchase themselves.
On top of the written agreement, the seller also gives the buyer a security deposit to protect against any damages to the home. The daily rate that the seller pays to the buyer is negotiable.
So what are the benefits of getting a leaseback as a seller? For one, it gives you greater flexibility when moving. One of a seller’s biggest concerns is making plans for their move while they sell and trying to coordinate their next purchase. Timing both transactions out is challenging. Further, closing dates can move around, and mortgage companies can be delayed. A seller leaseback would mean that you wouldn’t have to worry about those kinds of delays or finding a new house and trying to sync up both transactions.
Of course, there are some risks associated with leasebacks. As I mentioned before, a security deposit is typically required. The buyer may also nitpick you about little repairs, or refuse to give your full deposit back. To prevent this, take photos of the home’s condition and create a written inventory form so that everyone understands what conditions already existed when the sale closed.
From a buyer’s perspective, one of the benefits is that a leaseback could strengthen your offer. Ours is a very competitive market where it’s tough for buyers to get their offers accepted. Allowing a seller to stay in that home and use the extra time to buy another could catch the seller’s attention and cause them to choose yours over competing offers. Some buyers even offer free leasebacks.
If you’re a buyer currently living under a lease that doesn’t end for a couple of months, then letting the seller stay in the home and pay you rent would allow you to finish the terms of your lease before moving into your new home.
Now, a risk associated with leasebacks on the buyer’s side is that the seller could damage the home while they stay in it. Again, clear communication and documentation of the home’s condition are important in holding the party responsible accountable.
If you have any questions about seller temporary leasebacks or anything else to do with real estate, don’t hesitate to reach out to us. We’d be glad to help you.