A Rent Back, called Post-Settlement Occupancy in Maryland, occurs when the home sellers need more time to move out of their home than the closing date. It can benefit both parties, since the seller rents the property back from the new owners (the former buyers) at market value or the new owners' mortgage payment (whichever is higher).
I'm seeing a lot more of these transactions recently. They happen for a variety of reasons, but usually when a seller needs more time to move into their next home. How does this process benefit sellers? Because in our market right now you will have a very difficult time getting your offer accepted if you need to sell your home still, and don't have it under contract. This allows you to get started on your next home purchase from a stronger position than offering on a home contingent upon your home selling (which could be quick, or take a while).
How does this work? I have a transaction right now where the seller is building a new home, but it won't be ready to move in until almost 30 days after we close. Instead of extending settlement and risking anything changing on the buyer's financial side (ANYTHING can happen in Real Estate) it is a better idea to close on the house and then rent back that property from the new owners until she can move out. The buyers are more than happy to comply, since they happen to be under a lease until 30 days after settlement. It's a win/win for everyone!
In another transaction, I am representing some First Time Home Buyers who live with family. Although they'd love to be in their home as soon as possible, they can afford to be flexible on time. This actually won them the contract since the sellers needed some time to find and close on their next home. They are going to rent back the property from my buyers for the gap between closings to give them some time to move out.
What is required for a rent back:
- A written agreement called a Post-Settlement Occupancy Addendum. This outlines the responsibilities of both the tenant and landlord during the rental agreement.
- Consideration=Deposit from the tenant. This is a safety measure for the new landlord to ensure that if any damage is done to the property they will be able to use these funds for repairs.
- A Comparative Market Analysis for the rental. I always ensure that my buyer clients are receiving enough rent to either cover their portion of the mortgage for that rental time, or fair market value. I also want to be sure my sellers don't overpay to rent the property back for a set time.
That's it! If you're thinking about selling your home and purchasing your next one, think about a rent back option so you aren't homeless between closings. A good buyer will be understanding and make it work, and that way you'll be able to get a win a contingent contract on your dream home.
Dunkirk MD Homes for Sale - Genna Fleming, REALTOR® at EXIT 1 STOP REALTY
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