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What is a Lease-Back? A Huge help to Home Sellers Not Ready to Move.

If you’re buying a new home while selling the one you’re currently living in, or just feel that you need more time for your move, then you’ll definitely be glad to know what a "lease-back agreement" is.

As you might imagine, buying a house while selling the one you live in, can require some really good luck, timing wise, to get just right. After all, if you sell your home and have to move out before you’ve closed on your new home or even found a place to live, that means you’ll have to pay to stay in a rental, hotel or even the in-laws! Either way, you’ll have to endure the hell of moving twice.

Not so with a lease-back agreement, which gives the sellers extra time to live in the home after closing, essentially letting them become the new buyer’s temporary tenants. It doesn’t last for long—there are usually time limits—but it will give sellers a chance to close on their new home or just extra time to pack and tie up loose ends before they move. Offering a Lease-Back Can Help a Buyer Be More Competitive.

For the buyer, offering a lease-back agreement can have a couple of big bonuses. For one, in a competitive market, an offer that’s flexible on move-out dates might very well have an edge.

Done right, it can benefit everyone!

How a Lease-Back Agreement Works

Like the name implies, lease-back agreements are legally binding agreements made in writing between the buyer and the seller. Both parties need to decide on a couple of issues, namely how long the seller will need to stay in the house after closing and how much rent the seller will pay to be there. In this competitive market, many buyers are offering free lease-backs (really $1, but who's counting) as a way to make their offers stand-out. To play it safe, the buyer may also charge a refundable deposit, just like any landlord would. Once the buyer closes escrow on the house, the buyer will officially take possession and pay any upfront costs like a normal closing. The seller will pay any security deposits or upfront rent and remain in the house for a specified time.

What Lease-Back Agreements Mean for the Seller

Getting more time to buy your next dream home can be a lifesaver, but don’t dawdle—a lease-back won’t buy you much time. Typically, lenders won’t accept anything longer [than] 60 days. While you’re still at the property, there’s one more potential downside to deal with: It isn’t really yours anymore. You technically have a landlord now, which means if you cause any damages, you may not get your security deposit back.

If you have questions about this or anything else, don't hesitate to reach out!


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