Profile picture for Sunnyvalien

How common are 'rent backs'?

When we sold our condo in San Jose some years ago, we were able to extend our stay in the property for an additional month by covering the new owner's mortgage and related costs for that month. This was great because it gave us a significant buffer to find our current home in Sunnyvale. 

Now we have outgrown this home and are looking to move elsewhere in Sunnyvale or very close by. I realize that it completely depends on the new buyer, but I'm curious how common is this type of "rent back" (or whatever it's called) with single family homes? We'd like to do this again, if possible, since the market is so competitive now for buyers. 


  • January 06 2013 - Sunnyvale
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Answers (12)

Profile picture for wetdawgs
You can always ask.  Very few buyers are willing to consider it for several reasons.   The two major ones is that the empty walk through before closing is establishes condition before transfer of money, and the opportunity disappears if the owner stays on.   The second is if the previous owner doesn't move out on the agreed up date, the legal costs of eviction are very high.

If I were a buyer and the owner  wanted to rent back, I'd hold back 20% of the funds in escrow until after move out on the agreed upon date and home being in satisfactory condition, I'd charge rent about double my costs (mortgage, insurance, taxes) and require that the previous owner carry rental insurance/liability insurance.  I'd also ask my Home ownership insurance company if they permit this, often they require you to have special insurance for renters and don't cover if you aren't the occupant.

So, you can always ask but plan your life so it isn't essential.
  • January 06 2013
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Hi wetdawgs,
The market is currently fairly active, with low inventory. Buyers are therefore a little more prepared to agree to less-conventional terms like a rent back under such market conditions.
It's not uncommon for people to agree to a 30 day rentback. 60 days is a little less common. More than 60 days seldom occurs at all.

There is usually a security deposit held in escrow of $1k - $5k, depending on the home. The seller usually covers the buyers holding costs (Principal, Interest, Taxes, Insurance) for the term of the rent-back. All financial arrangements are handled by the escrow company, as a part of the closing. The escrow company also holds the deposit until all parties agree upon its release.

It's really not that hard to do, and not that uncommon.
Please feel to call me on my cell # below, if you wish to discuss further.
Aileen 
[deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]

  • January 06 2013
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It really depends on how much flexibility the other party has. It's become less prevalent but, discuss it with your agent. Both of your agents should be able to work together, provide a professional framework for your agreement and ensure both of you make an informed decision based on the risks and benefits. However, the actual contract should be reviewed by an attorney. Agents are not lawyers and this is not the area to save money. On a personal side: You're adding risk by increasing the duration of your relationship with the other party. Consider your options carefully. Our broker has a legal team that provides back up support to ensure our customers are fully informed before making a decision. It's an expensive feature that few customers appreciate. Best of Luck.
  • January 06 2013
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Hi, Rent backs are quite usual right now. You just need to out it in writing before the contract is finalized between buyer and seller. Usual time to rent back, in the Westside, is 45 days. Douglas Lagos Realtor®, Certified HAFA Specialist (CHS) DRE# 01921046 Coldwell Banker Residential Tel. [deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]
  • January 15 2013
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Profile picture for Ana Ma

If you're interested in selling your home, but worried about where to stay while you look for a new one, it's common practice to negotiate a "rent-back" on your existing home. 

A "rent-back" gives sellers the ability to stay in their home after the close of escrow, for a period of time, while they look for a new home.  (Note; however, most lenders will only permit a 30-day rent back. If there is more than 30-days in the contract, the lender will be unable to sell their loan to FNMA.) In a "rent back", the seller ends up as "tenant" and the new buyer(s) as "landlord".  It's a fantastic option for anyone looking to transition from one home to another, but worried about being "homeless".

Hopefully, you will price your home such that you receive competitive offers. If you do, it is not unusual in our area to have one or more of the competition allow you to rent back FREE to "sweeten the deal," as part of the offer. (This happens when your agent puts the word out that the seller(s) are looking to rent back.) 

The only draw back to this would be lack of inventory on the buying side.  What if you don't' find your dream home before you have to vacate your old one? What do you do then? Are you willing to settle on any old home just because you're running out of time?

If this is not how you want to shop for a new home, I recommend renting an apartment or staying with family/good friends etc. to avoid the pressures of buying within a 30-day period.  These are things to think about as you evaluate your current circumstances and current market conditions. 

An agent can help evaluate your options as well.

Good luck!

  • January 17 2013
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In a buyers market it is used often...in a seller market it will not do as well...best of luck
  • January 21 2013
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Hi Sunnyvalien,

You've received several responses; some say rent-backs are common and easy, some say it is uncommon and difficult.  In the past 2 months, I have had three clients negotiate a rent-back, between 30 and 60 days.  Last Summer, one buyer agreed to a 90-day rent-back.

In a sellers' market, where we are today, you often have several options.  Top dollar may not be your number one priority.  If a rent-back is important to you, I recommend that your Realtor include it in the "special" agent only section of the MLS listing.  You will be amazed at how many buyers are open to the idea and happy to accommodate.you.  Mention it up front and there will be no surprises.

Good Luck!   Craig
  • January 25 2013
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That depends on how competive the home bidding is. For example, you have more offers than you know what to do. There are those willing to wait
til the sellers find a place gets the offer.

Often the sellers may get a 1 month rent for free and pay some rent beyond.  Unless the seller wants to make a rental property. It is not recommended to lease back too long. The market has drifted a bit
not that difficult to get into a home than a few months ago. One needs to refrain from renting back too long as byers may just walk.
  • May 12 2013
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Profile picture for user2412140
We're going through this right now with the i'm surprised nobody is mentioning one very important factor.  If you don't own a home, a renter, then you cannot get what's called a "Landlord Policy" to cover the damages that the seller COULD incurr before you live in the home.  Our sellers want to close at the end of next month (55 days from today) and want to rent for 2 months after that!  We were considering the rent back option but then found out we're 100% liable for anything that were to happen when they are living in OUR home, so it's obvious that we said hell no!  I hope this helps someone.
  • June 05 2013
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Profile picture for Rabia Alizai
they were really common over the summer and even now.  most of my clients required rent back and I was able to get them a rent back. it's a bit tricky because lenders don't really like the idea of rent backs too much.  there are often 2 ways to do rent backs, one way is where the buyer pays the PITI and essentially gives you, the seller a free rent back...the other way is when the seller pays a daily PITI, usually tittle will just hold on to the funds in escrow after the sale of the home for a certain number of days.  [contact info deleted by Zillow moderator. Please see our Good Neighbor Policy for posting guidelines]
  • November 22 2013
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Profile picture for aracz
)Hi Sunnyvalien,

Rentbacks are quite common. I just closed a transaction a few days ago where this is in place. There is a form for the Rentback after sale scenario.

There are a couple things to consider:
1) What the rent will be: Some base it on the buyers PITI(loan, taxes, insurance), plus HOA (if any), while others may base it on Fair Market Rent.
2) A rentback can affect the purchase price negotiations, since it May be an offsetting feature
3) You want to be careful not to turn away a potentially very high offer that would not be ok with the rentback, so you need to word it carefully in the MLS and marketing materials.
4) It is important to have the extra time to choose your Next home in this market with low inventory and multiple offers if you can.
5) Draw out a timeline with the help of your agent for the Sale, using average days on market for your area, then add a 30 day escrow, and after that you can draw out a typical timeline for your Purchase, and see how they mesh. There are a lot more details in this, like seeing if your criteria and price for your Next house generate more than 5-10 or more homes per month in recent months to see how realistic it is for your purchase timeline scenario.
6) You can also negotiate for a longer escrow on your Sale (45 or 60 days), and then need less of a rentback, but there are plusses and minuses to this as well.

I would be happy to go into detail with you if you like.

Please feel free to contact me if you like.

Kind regards,

Arpad
  • November 27 2013
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Profile picture for Julie Wyss

During the first half of 2013, about 50% of my transactions had a seller rent back, however there are very few since July 2013.

  • January 05 2014
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