Stall Tactic
Most home sellers soon become buyers. Ideally, the closing on their sale occurs just before their purchase is finalized, allowing sellers to use the sale proceeds to buy.
But the scarce for-sale inventory in many markets has tripped up this finely choreographed pivot. While their own home may sell in days, sellers soon confront a problem: How will they find a suitable place?
Agents say sellers are asking the buyers for time to stay in their home after the close of sale. Commonly known as “rent-back” or “lease-back” agreements, legal terms like “seller in possession after the close of escrow” vary by state.
With these, the new buyer lets the seller stay, usually a month or so after the closing, explains Dana Bull of Sagan Harborside Sotheby’s International, Marblehead, Mass.
But potential problems can occur, so seek expert advice, notes Seattle real estate attorney Kim Sandher. Here, some considerations:
1. Stretch closing, but don’t imperil your buyer’s financing.
Sixty days is usually the maximum between when a seller accepts an offer and the transaction closes. If they stretch closing, sellers should ensure that their buyer doesn’t also move back a financing contingency, warns Bull, to ensure the sale won’t be derailed because buyer can’t get a mortgage.
2. Negotiate the agreement ASAP.
Tracey Hampson, with Realty One Group, Valencia, Calif., says her buyer recently was asked by the seller for a rent-back, but the request came with just one week until the closing. Had the seller asked earlier, “Then I’m sure my buyers would have [agreed].”
Given that buyers are making more concessions in this sellers’ market, “It’s a very effective negotiating tool to offer a free lease-back,” says Kevin Deselms of RE/MAX Alliance, Golden, Colo.
3. Don’t be exposed to risk of damage.
Both parties should check with their homeowner’s insurance provider for policy provisions should the home be damaged during the rent-back, advises Sandher.
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