Imagine this scenario: You’re selling your house and purchasing another. You’re told you need to be out of your home by a specified closing date. Unfortunately, your new destination experiences a construction delay and isn’t going to be ready by the closing date. Perhaps you have children, pets and a house full of furniture as well, which can complicate the situation even further.
One solution is called “post-closing occupancy,” which allows you some additional time in the home you are selling and provides some greatly needed flexibility for all parties. That extra week or two can save you from a lot of stress!
One of the hardest things about selling and buying is that you are not really free to buy, in most cases, until you have a buyer for your property. If you sell with the stipulation that you are allowed to rent back for an extended period of time, it gives you the freedom to go out and search for a property just like someone who has no contingency of selling. As a result, your negotiating position is significantly stronger and you can buy with renewed confidence. And, you are likely to secure your next property for a lower price because you can promise contractually to complete the deal as written.
So how does this work? The person renting back from the new owner typically pays the amount of the new owner’s mortgage payment, taxes and hazard insurance for a negotiated period of time. This amount is typically collected at the time of closing. The renter converts their homeowner’s insurance to a renter’s policy for the negotiated time period and also pays for the utilities at the property until the agreed upon vacancy date. In some cases, a security deposit may also be required as protection from damage caused to the home during the move, for example.
Rent backs can make closing a little more complicated, but these situations are not uncommon and can typically be worked out between the two sides. When handled diplomatically and up front — as opposed to a last-minute request — this can be a tremendous benefit.