Renting Your Home After Selling: What You Need to Know
Have you ever wondered if it’s possible to sell your house… and then rent it back? If so, you’re in luck, as this legal structure, known as a rent-back agreement, exists and is becoming increasingly popular.
There are a variety of reasons for renting back a home after selling. One reason is having school-aged children. In this case, a seller might not want the disruption of moving out before the end of the school year, so rent-back agreement can be a great option to allow the children to stay at their current school. Moreover, if someone is planning to move to a new city, they might need to stay in their current home for a period of time if there is a gap between the sale of their home and when they can move into their new residence. On a related note, sometimes sellers are unable to purchase or rent a new home until completing the sale on their old one. However, if a seller wishes to enter a rent-back agreement with the buyer of their home, it is important to communicate that with the buyer before the closing date, as the buyer has no obligation to lease the home back to the seller after closing.
The following list outlines some important factors to consider before signing a rent-back agreement.
- Length of Rental – Regardless of whether a seller plans on a long-term rental or only wants to stay in the house for a couple of months, it’s important to stipulate the length of the rental up front to avoid a situation where a renter is told they must vacate the property sooner than expected.
- Rent – How much a seller who is renting back their home pays in rent is up to the buyer. While a seller might be in a position to negotiate the amount, they should keep in mind that the buyer has to pay the expenses associated with their new home and, in a rent back situation, most likely another residence (where the buyer lives). A seller renting back their home can expect to pay at least the home’s mortgage, taxes and insurance each month. For a short-term lease of less than a month, the buyer may specify a daily rental amount that the seller is required to pay as the tenant.
- Security Deposit – As with all leases, the renter (which is the seller in this case) is responsible for damages while renting the property. It is important to work with the buyer to determine the security deposit amount, and also to take pictures of the home’s exterior and interior before signing the rent-back agreement to highlight any existing damage. This will help prevent the new owner from unjustly taking the security deposit to pay for the repairs. The seller should incorporate copies of these photos into the rental agreement so that there is hard, contractual evidence in the case of a dispute.
Other factors to consider when writing the rental agreement are who will pay for insurance, utilities, and maintenance expenses. Additionally, the seller and buyer should check with the insurance company that will be providing insurance during the seller’s lease to ensure the agreement complies with the company’s requirements for proper coverage of the home and contents.
Swift Homes Pro Tip: Asking an attorney to look over any documents between the seller and buyer can ensure the seller is legally protected should something go wrong.
In conclusion, a rent-back agreement is a great option for sellers who need time to find their next residence, or who are facing a gap between closing on the sale of their home and moving into their next residence.
With over 5,000 homes purchased and more than 20 years of experience in the business, Swift Homes is one of America’s largest cash home buyers. Contact Swift Homes today to get answers to any questions about the rent-back process.