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“Renting Back” After Your Home Is Sold
Dated: May 13 2022
Sometimes it’s helpful to sell your home before you really want to move. This often happens when you are having a new home built, but aren’t sure of the completion date. Is there any way you can sell your home so you’re sure of the funds available for the new purchase, but continue to live in your old home until construction of the new one is complete. Yes, there is with the renting back strategy.
Enter the Lease-Back or Rent-Back Agreement
The particulars of this strategy vary from state to state, but in the strong seller’s market we’re experiencing, buyers will often agree to let the seller stay in the home for a period of time as long as rent is paid. In a competitive situation, the buyer willing to do these will often have the winning bid even though there is another offer as high as his?
The agreement covering the situation states the length of time the seller will remain. It can be done with a specific date named or wording that allows the seller to remain up to a specific date with the possibility of her moving sooner. The amount can be a fixed figure paid out of the proceeds of settlement or a monthly amount, or a daily amount. It is usually, but not always, tied to the amount of the mortgage payment under the buyer’s new loan. Sometimes there is a deposit against damage, sometimes not. There is usually a clause saying the seller will hold the buyer harmless for any damage to himself or his property which occurs after the sale is consummated and before the seller moves.
The attorney who draws up your contract offer can create such an agreement. If you’re using online forms, you should be able to find one for this situation. If you’re working with a real estate broker, he or she can handle it for you.
I’ve recently seen a very pleasant example of this idea in action. An elderly widow contracted to have a one level condo unit built in a new community which provides all exterior maintenance. She had had hip replacement surgery and wanted to get away from the drawbacks of the home in which she’d reared her children. The home was large, had stairs and was located on a large, partially wooded lot with many mature perennials and shrubs. Both the home and garden were beautiful, but high maintenance.
Her contract to purchase required a series of deposits and a firm indication as to her source of funds well before settlement on her new condo. The widow put her home on the market. A young couple with two sons was very anxious to buy it. The situation was competitive. They made the widow an offer. She countered their original offer. She did not raise their offer price, which was slightly below her asking price. She did not believe the young couple would qualify for a larger loan. Instead, she did something rather creative.
The widow countered with a proposal that she “rent back” for a period of “up to” a certain date (a date beyond her scheduled competition date on the condo) in exchange for a modest flat sum to be paid to the buyer at settlement. The total rent back period was less than two months. The flat fee was less than the amount of the new mortgage payment for the buyers. However, since they made no payment on their new mortgage the first month, it wasn’t too far out of line. The couple really wanted the home, so they accepted the counter offer.
Another win, win situation was created. The widow only had to move one time and the young couple got a house they probably wouldn’t have in a straight bidding war. If you find yourself in a situation similar to either the widow or the young couple, perhaps you can work out a similar solution.
Rent to possess understanding states that you rent a home for a specific sum for a while with the alternative to get it before the rent terminates. It has two sections, one is a standard rent arrangement and another is the alternative to purchase. Through these means, you can see if the arrangement is a decent decision for you or not.
• Pay the option money: If you pick a rent to-possess understanding, at that point you need to pay the dealer a one-time, forthright charge called the alternative expense. This charge is the sum which gives you the alternative to purchase the house by some date later on. The choice charge is frequently debatable and there is no standard rate for this expense.
• Read the Contract Carefully: There are various kinds of rent to-claim contracts so you should peruse it cautiously. A few agreements are more purchasers inviting and adaptable however some may not be shopper benevolent. Hardly any agreements give you the privilege yet there is no commitment to purchase the home when the rent terminates. On the off chance that you choose not to purchase the property toward the finish of the rent, at that point you can just leave. Though a few agreements make you lawfully committed to purchase the home toward the finish of the rent if you can manage the cost of it.
• Specify the Purchase Price: Rent-to-claim arrangements should make reference to when and how the price tag of a home is resolved. In a couple of cases both the gatherings concede to a price tag then the agreement is marked frequently at a greater cost than the current market esteem. In different circumstances, the cost is chosen when the rent lapses relying upon the current market esteem.
Therefore, these are steps to consider prior to going for Rent to own arrangement. Perusing the terms and end is one of the main parts of the understanding. Rent alternative agreements are quite often ideal than the rent buy contracts since they contain greater adaptability and purchaser don't have the danger of getting sued in the event that they can't accepting the home when the rent lapses. Along these lines, a rent to-claim understanding is helpful for the eventual home purchasers who need to move into a house immediately. There are sure terms and conditions that must be met, as per the rent to-claim arrangement so you can get profited by it.
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Author : Naveen Vadlamudi
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Markham, Ontario, L3P 3P9
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