If you’re selling a home in Midland, you’ve probably already thought about your ideal closing date. Maybe you need to relocate for work by a certain date, or perhaps you need some more time to find a new home. In any case, it’s important that you can close your real estate transaction on the right date. If you can’t, you may want to ask the new buyers if they’ll be willing to enter into a rent-back agreement with you. Here’s what you need to know.
What is a Rent-Back Agreement?
A rent-back agreement is just what it sounds like: The new buyer agrees to let you rent your home from them until you’re ready to move out. For example, if you close on your home on the 1st of the month but can’t move into your new home until the 15th, you may be able to negotiate with the buyer so that you can rent back the house until then.
In a case like this, you’d pay the new buyer rent, and they’d wait to move in.
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Why Do Some Buyers Like Rent-Back Agreements?
Buyers who are willing to rent back a house to the owner can benefit in a couple of ways – especially when it’s a competitive market and there are other buyers making offers. In many cases, sellers will choose a buyer who’s willing to agree to a rent-back situation over others, even if their offer isn’t as high as others are. Additionally, buyers charge sellers for renting back the house; many buyers use that money to recoup some of their closing costs.
How Does a Rent-Back Agreement Work?
A rent-back agreement is a written agreement that’s a little bit like an apartment lease. The buyer and seller decide together how long the seller will remain in the house after closing, how much rent the seller will pay, and even how much money will change hands in the form of a deposit.
The real estate transaction proceeds as normal. The rent-back agreement is a separate agreement.
Related: Should you buy a duplex as a real estate investment?
A Word for Buyers Considering a Rent-Back Agreement
If you choose to sign a rent-back agreement with the seller, you’ll essentially become a landlord right after closing. That means you have all the same responsibilities a landlord does – including making repairs on the house if something goes wrong. You’ll most likely have to clear the agreement with your lender. And if the seller doesn’t move out on the agreed-upon date, you’ll have to do the same thing a landlord would: Take them to court.
Usually, rent-back agreements work out very well for everyone involved. The seller has a place to stay for a while, the buyer gets to gather some cash, and everyone’s happy. Just be cautious on either end of the deal to make sure your rights and responsibilities are clear from the get-go.
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