Selling your home before you really want to move can sometimes be beneficial. This frequently occurs when you are building a new house but are uncertain of the completion date. Is there a way to sell your house so you know you will have enough money to buy a new one but keep living in your old one until the new one is built? With the renting-back strategy, there is, indeed.
Enter the Lease-Back or Rent-Back Agreement. The specifics of this strategy vary from state to state, but in the strong seller's market we're in, buyers will often agree to let the seller stay in the home as long as rent is paid. Even if there is another offer that is as high as his, the buyer who is willing to do this will typically have the winning bid in a competitive situation.
The duration of the seller's stay is specified in the situational agreement. It can be done by naming a specific date or using language that lets the seller stay up to a certain date with the possibility of her moving earlier. The payment can be a daily sum, a monthly sum, or a fixed amount taken from settlement funds. It is typically, but not always, linked to the buyer's new loan's mortgage payment amount. There may or may not be a security deposit against damage. Most of the time, there is a clause in the contract that says the seller will hold the buyer harmless for any damage to himself or his property that happens after the sale is done and before the seller moves.
This kind of agreement can be made by the attorney who wrote your contract offer. You should be able to find a form for this situation if you use online forms. You can handle it on your behalf if you work with a real estate broker.
An Example I recently witnessed a delightful application of this concept. An elderly widow contracted for the construction of a one-story condo in a new community that takes care of all exterior maintenance. After undergoing hip replacement surgery, she desired to escape the difficulties of the household in which she had raised her children. The house was big, had stairs, and was on a big, partially wooded lot with a lot of old shrubs and perennials. The garden and house were both beautiful, but they required a lot of upkeep.
Before she could close on her new condo, her purchase contract required a series of deposits as well as a clear declaration of her source of funds. The widow listed her home for sale. A young couple with two sons wanted to buy it right away. The competition was fierce. They made an offer to the widow. She turned down their initial offer. She did not increase her asking price, which was slightly lower than their offer. She was of the opinion that the young couple would not be eligible for a larger loan. She did something rather inventive instead.
In response, the widow offered to "rent back" the condo for a specific period of time "up to" a certain date (a date that was beyond her scheduled competition date on the condo) in exchange for a small one-time payment to the buyer at settlement. The rent was returned in less than two months all together. The buyers' new monthly mortgage payment was less than the flat fee. But it wasn't too out of line because they didn't pay their new mortgage the first month. The couple accepted the counteroffer because they really wanted the house.
Another win-win scenario emerged. The young couple got a house they probably wouldn't have had in a straight bidding war, and the widow only had to move once. If you're in a similar situation to the young couple or the widow, you might be able to come up with a similar solution.