The rent back is a contractual agreement that effects each side of the real estate sale differently. Sellers tend to benefit greatly from a rent back! Annnnd, buyers tend to be on the shorter end of the stick of a rent back.
A rent back is when a seller remains in their home after the sale has closed for a defined number of days. The seller becomes the tenant, and the buyer becomes the landlord. Usually, this is an additional 30-60 day "rental" period beyond the 30 day escrow period. I use these quotation marks for good reason, because in the Seattle market it's rare when a seller compensates the buyer for the rent back. That's a seller's market for ya!
Buyers often utilize a rent back in their offer as an offer strengthener in a multiple offer scenario. Owner occupied sellers tend to be especially grateful for a little extra time to move post closing, because most are shopping for their next home simultaneously. At closing, the buyer will begin paying their mortgage, homeowner's insurance, and property taxes. They get a key on closing day, but their walk through for the property won't be until the end of the rent back period.
Sellers who are selling their home to buy their next home often utilize this rent back strategy. By leveraging the equity in the home, there are many ways to strategize the financing, but only a few ways to manage the actual transfer of property and moving. The rent back allows the seller to close on the sale of their current home, remain in the home, and begin shopping for their next home (rent free). Ideally, they will also close on the sale of their next home during this time. They continue to pay the utilities, maintain the property, and clean and empty the home before the transfer of property.
It can feel a little stressful for the seller turned buyer during the rent back period. Not knowing where you're moving to next creates uncertainty and fear, it's only logical! Having a place to live is a must. But, in my experience, if the plan is well executed, all the dominos fall into place on time with outstanding outcomes.
The rent back can be a great negotiating tool for a buyer and a seller. We negotiate these types of sales a few times per year (it's very niche) and they're tricky, require planning, trust, preparation, and a little bit of gumption from a seller and a little bit of generosity from a buyer. On either side of the deal, it's gutsy to trust in this process.
We look forward to helping to strategize your next move, it's what we do best.
