1. Home
  2. Buyers
  3. What Is A Rent Back?

Whether you are in a real estate agreement currently or considering buying or selling a home, you need to understand some of the things that can come up in an escrow process. There are a lot of variables that can come up, so you want to be working with an experienced agent. One of the big things a seller can ask for is a rent back. Let’s dive into learning about what a rent back is so you are prepared if this ever comes up.

What Is A Rent-Back?what is a rent back

A rent back occurs when there is an agreement between a home buyer and seller that allows the seller to rent or lease back the home out of their equity. This means both parties have agreed to allow the seller to continue to live in the home for the agreed-upon payments. In some cases, this is called a sale and rent back a sale-leaseback, or a post-settlement occupancy. All of these terms mean the same thing. This is usually short-term as the seller moves into their new home.

How Does It Work?

This process needs to always be done with a formal agreement. The agreement should be done with your agent and it should specify all of the terms and conditions for the seller’s occupancy. You want every detail documented to support both the buyer and seller. If the buyer is using a lender then this can be trickier but in most cases, lenders usually approve a short rent-back agreement. If loan documents state the property must be owner-occupied by a certain date you want yp make sure the rent-back doesn’t violate this. The documentation agreed upon is a legally binding agreement, so this should be taken seriously as a part of the entire real estate contract.

What Are The Benefits?

This agreement can have benefits for the buyer and seller. Sellers will have more time to find their new home and move into it. This helps sellers avoid moving multiple times and in turn reduce the stress of the situation. It takes the pressure off their timeline. Buyers benefit because they will get rental income that can help with the cost of their mortgage payments. Being a buyer that’s willing to accommodate a rentback can make your offer more appealing in a hot market.

In Conclusion

As with any legally binding agreement you want to take your time to consider your personal and financial situation. If you are looking into working with a rent-back agreement you want to talk with your real estate agent, attorney, and lender. If all parties agree then the documentation will state the rent rate, deposit, length of time, insurance, and utility responsibilities. Make sure everything is covered correctly.

Whether this is a part of your real estate process or not, you want to be working with a trusted and experienced agent. For more information on the price of buying or selling a home, contact me. I would be happy to help you get started in your home-buying journey!

More great information for Sellers and Buyers: